TracFone Wireless — now a unit of Verizon — has agreed to pay $13.4 million in a settlement with the regulator and the U.S. Department of Justice for alleged violations of the FCC Lifeline program that occurred before Verizon acquired TracFone.
The settlement covers allegations that TracFone signed up more than 175,000 customers for the Lifeline program during 2012-2015, and had poor oversight and monitoring of the program, both in violation of the False Claims Act. Verizon acquired TracFone late last year.
TracFone did not have adequate internal controls, nor did it have Lifeline compliance measures in place for an extended period of time, resulting in the failure to detect that contract sales agents in Florida were improperly targeting and marketing Lifeline services, an issue that went on for several years, according to the FCC.
This lack of oversight enabled those sales agents to exploit a loophole in TracFone’s process for verifying Lifeline eligibility, taking advantage of non-low-income veterans, Medicare patients, law enforcement, and other people who did not qualify for the Lifeline program, the commission said.
This isn’t the first time Tracfone has run afoul of the FCC. In 2018, the FCC proposed a $6 million against the company for violations of FCC Lifeline program rules similar to those just announced.
The most recent settlement “resolves a qui tam action in the United States District Court for the Middle District of Florida, makes the Universal Service Fund whole, and provides damages to the government,” the FCC said in a press release.
The compliance agreement requires Tracfone to modify its business practices to ensure compliance with Lifeline program rules and obligates Verizon to oversee and audit the Tracfone LIfeline program.
Compliance measures must include designating a compliance officer, establishing a compliance oversight team, and establishing a comprehensive training program for TracFone employees
and marketing agents covering the Lifeline Program and the Affordable Connectivity
Program. Background checks for TracFone employees and marketing agents also will be required, along with “comprehensive” monitoring and reporting.
“Today’s settlement reflects the FCC’s ongoing commitment to root out waste, fraud and abuse in its universal service programs,” said FCC Chairwoman Jessica Rosenworcel, in a prepared statement. “Especially during these unprecedented times, the Universal Service Fund provides a key lifeline for many families, and our careful stewardship of the program ensures that low-income households can access the telecommunications services they so critically need. Let today’s action serve as a warning to others that we will do everything we can to ensure strict compliance with the rules of the road.”
Joan Engebretson contributed to this report.