Report: Massive fraud in Obamaphone program

The scandal-plagued  program initiated by President Obama that provides phones and internet service to poor people is beset with massive waste, fraud, and abuse, according to a three year study by the General Accountability Office.

The government watchdog conducted the review at the behest of Democratic Senator Claire McCaskill. They found that 36% of participants were probably not eligible to recieve the benefit.


GAO investigators sampled the program’s population and found that it had been paying for nearly 6,400 phones for people whom the government has listed as deceased; another 5,500 people were enrolled for two phones, and another group of people couldn’t prove they were eligible to receive their free phone.

“A complete lack of oversight is causing this program to fail the American taxpayer — everything that could go wrong is going wrong,” McCaskill said in a statement. “We’re currently letting phone companies cash a government check every month with little more than the honor system to hold them accountable, and that simply can’t continue.”

Originally conceived during the Reagan administration, Lifeline was initially meant to provide poor people with a phone in case of an emergency or, as time went on, to apply for a job.

Administered by the Federal Communications Commission, Lifeline requires telecommunication companies (At&t, Verizon, Sprint) to pay a percentage of their voice service revenues into a pool called the Universal Service Fund that is administered by an independent nonprofit company called the Universal Service Administrative Company. Telecom companies pass on the cost of their contributions to consumers, whose monthly bill includes a “universal service fee” charge.

The three-year GAO investigation found that the program has put away more than “$9 billion, as of September 2016 outside the Department of the Treasury in a private bank account.”

A spokesman for FCC Chairman Ajit Pai, who had already put the dubious program under review, said the “GAO report confirms that waste, fraud, and abuse are all too prevalent in the program.”

“Chairman Pai looks forward to working with his colleagues to crack down on the unscrupulous providers that abuse the program because every dollar that is spent on subsidizing somebody who doesn’t need the help by definition does not go to someone who does,” Pai’s spokesman added.

President Reagan started the program at a time when there were no smart phones and few cell phones. The idea was to get the big telephone companies to supply land line phones to the poor for emergency use. Since no taxpayer money was being used for the phones themselves, it seemed to be an acceptable partnership between the government and private businesses.

But like almost all government programs, this one got out of control. The explosion in wireless communications made it ridicuously easy to defraud the companies until today, nearly 2 in 5 participants in the program are not eligible.

Ultimately, the government is responsible for the administration of the program. The FCC has been lax in the past in oversight, but with a new chairman dedicated to rooting out fraudsters, that's going to change.

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