Criminals target government funded cell phone program


by Chris Nagus

Posted on November 10, 2011 at 10:36 PM

Updated Wednesday, Oct 30 at 10:11 AM

(KMOV) -- Even if you don't want a government funded cell phone, you might get one in the mail. St. Louis area residents called News 4 after phones started showing up in their mailboxes from several different telecom providers. 

Barb Combs was surprised when she received two free phones from Tag Mobile, "I'm thinking why do I have these where did they come from and what do I do with them now." Rose Smith said, "I don't need a cell phone" after she received a free phone from Life Wireless. 

According to the Federal Communications Commission (FCC) telecom providers receive money from the Universal Service Fund to provide cell service to low income residents. In order to qualify for the program you need to show you are receiving additional forms of assistance like food stamps or TANF (Temporary Assistance to Needy Families). The Universal Service is funded by fees paid to telephone providers when customers pay their phone bill.
A spokesperson for Life Wireless tells News 4 they discovered fraud involving an independent contractor who signed up 917 St. Louis area residents for phones they never requested. Michael Geoffroy says hundreds of orders were stopped before shipment, but hundreds of others were delivered. "They signed up hundreds of folks to get commission from us, as we were processing the orders we discovered the fraud" said Geoffroy. The Life Wireless spokesperson also said his company plans to prosecute, and has filed a report with St. Louis police. Geoffroy also said, "Fraud is a serious issue, it's something that costs us money." In this case Life Wireless refunded 20 thousand dollars back to the Universal Service Fund after the fraud was discovered.
Consumers like Rose Smith are still left with lots of questions. Smith wanted to know, "how did they get my name, my address, your personal information, what else do they have of mine." Geoffroy didn't know how the independent contractor obtained the names of 917 unknowing consumers, but speculated the names could have been pulled from the phonebook.
Free phones also showed up from YourTel America and Tag Mobile. Those companies also receive money from the Universal Service Fund to provide cell service to low income Missouri residents. According to the FCC each customer receives ten dollars worth of free service - which covers the cost of the phone and up to 250 free minutes for some providers. In Missouri the ten dollar per person fee adds up to millions of dollars each year. Click here to see how much money Missouri telecom providers collected from the Universal Service Fee.
News 4 received this response from Tag Mobile concerning potential fraud. "In the last three months we have had a little over 100 handsets returned back to us due to being non-deliverable or refused by the customer.  During this same time period we activated approximately 14,800 customers in MO.  This equates to a less than 1% of our accounts being returned or cancelled. "
According to YourTel America "We are very concerned about any fraud, not only as it affects us directly but as it potentially harms the Universal Service Fund and Low-Income consumers who benefit from the fund.
Although the program has been the target of fraud, Michael Geoffroy points out, "it's a lot of money and a lot of customers but it's a program that helps people in need at a low price per person." Telecom providers told News 4 the program allows low income residents to stay in touch with health care providers and possible job opportunities.  Michael Geoffroy also says companies that receive money from the Universal Service Fund are required to do outreach to get customers signed up.


Click here to view Lifeline disbursements