Two Oklahoma phone companies have agreed to pay more than $1 million to resolve an investigation into whether they violated rules of the Lifeline program, the Federal Communications Commission announced Tuesday.
2/19/2013 Related Story: Two More OK Phone Companies Under Investigation For Federal Cell Phone Program
Terracom LLC, which is based in northwest Oklahoma City, and YourTel America Inc., which federal filings list as a Terracom affiliate, agreed to repay $416,000 plus interest for duplicative payments under the program and pay the U.S. Treasury $600,000 to resolve the inquiry.
The investigation was brought about under rules the FCC adopted in 2012 to cut down on waste, fraud and abuse in the $2.2 billion program. The FCC examined Terracom and YourTel's subscriber lists in summer 2012 and found duplicate wireless and landline account-holders, according to an agency news release.
"Today's enforcement action sends a clear message: the FCC will not tolerate waste or fraud in the Lifeline program," FCC Enforcement Bureau Chief Michele Ellison said. "Fundamental reforms of the program's rules are allowing us to vigorously pursue those who had abused the system – and safeguard this vital program for low-income Americans who truly need it."
According to the FCC, the two companies have agreed to create a "robust compliance plan" for the next three years and will establish better record-keeping for Lifeline claims; provide compliance training for employees; and file regular reports with the FCC documenting their progress.
The Oklahoma Corporation Commission declined to comment on the fines because it has pending enforcement actions against five carriers – including Terracom – that together took in $147 million in Lifeline subsidies in 2012.
As 9 Investigates has reported, the Lifeline program has come under scrutiny for its explosive growth and potential for carriers to overlook requirements that participants meet income limits or participate in certain social-service programs and not have more than one subsidized phone per "economic unit" – essentially a household.
While the FCC touts Lifeline's role in increasing the percentage of low-income households with phone service from 80 percent to more than 90 percent, it acknowledges that changes in 2005 and 2008 to allow low-cost wireless plans "without adequate safeguards" caused rapid growth and incidents of abuse.
In a statement to 9 Investigates, TerraCom Vice President Dale Schmick blamed the duplication of subscribers on a software program the companies previously used. Schmick noted that a software vendor discovered the issue at roughly the same time as the FCC.
"We began correcting the issue when we discovered it and for the past several months we've been implementing protections and controls to prevent this from happening again," Schmick said. "Although we believe this issue occurred as a result of the inconsistent address formatting in our old systems, it is still a matter of serious concern for us and it is why we fully cooperated with the FCC."