ICON Telecom, Its Owner, And A Former Associate Charged In $25 Million Fraud In Federal Wireless Telephone Subsidy Program
Oklahoma City, Oklahoma – WESLEY YUI CHEW, of Edmond, Oklahoma, his company, ICON TELECOM, INC., also of Edmond, and OSCAR ENRIQUE PEREZ-ZUMAETA, of Cancun, Mexico, have been charged with crimes involving more than $25 million of fraudulent claims against the federal Lifeline telephone program, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma, and David L. Hunt, Inspector General of the Federal Communications Commission ("FCC").
The current Lifeline Program, which was created in 1985, furthers the FCC’s mission to provide all Americans with access to a basic level of telephone service. Since 2005, Lifeline has provided subsidies to participating telephone companies not only for landline service, but also for wireless service for qualifying low-income customers. The Universal Service Administrative Company ("USAC") administers the Lifeline Program on behalf of the FCC and under detailed federal regulations. To pay for the program, USAC collects fees from telephone companies, which often pass the fees on to customers as "universal service charges" on monthly telephone bills.
Most participating wireless telephone companies receive a subsidy of $9.25 per month for each qualifying low-income customer. If a qualifying customer lives on "Tribal Lands," however, the company receives $34.25 for each qualifying customer. Much of Oklahoma includes Tribal Lands that qualify for the higher monthly subsidy.
Participating telephone companies file forms with the FCC, prior to receiving reimbursement, that report the number of Lifeline eligible subscribers that have been served by the companies. Companies must also file annual reports by January 31 to certify that customers who received Lifeline service at an earlier date remain eligible for the program.
Icon Telecom, owned exclusively by Chew, participated in the wireless Lifeline Program from July 2011 until September 2013. It is alleged that in September 2011, Icon reported fewer than 2,200 wireless customers who qualified for the Lifeline program. By November 2012, that number had grown to 135,364. It is alleged that Icon always claimed subsidies at the "Tribal Lands" rate of $34.25 per customer per month. Although it had fewer than ten full-time employees, it is alleged that Icon received a total of $58,283,329 through the Lifeline Program during 2011, 2012, and 2013.
It is further alleged that to recruit new customers, Icon relied almost exclusively on PSPS Sales LLC, which Perez-Zumaeta owned and operated. Icon paid PSPS Sales from $7.00 to $15.00 for each new customer. From December 2011 through April 2013, Icon paid more than $1,040,000 to PSPS Sales.
Information Charging Chew and Icon Telecom
Chew has been charged with money laundering for his transfer of $20,455,829.10 on April 9, 2013, from an Icon account to a personal account. If convicted, Chew faces up to 10 years in prison and a fine of $250,000 or twice the amount of the criminally derived property involved in the transfer, whichever is greater.
Icon is charged with making a false statement to USAC. Specifically, it is alleged that USAC auditors asked Icon on May 6, 2013, to provide 58 specific customer recertification forms as part of a Lifeline audit. It is alleged that in the absence of legitimate forms, Icon created false recertification forms, fabricated the subscribers’ signatures on the forms, and electronically submitted the fictitious forms to USAC in response to the audit. If convicted, Icon faces up to five years of probation, a fine of up to $500,000, and mandatory restitution.
The information also seeks forfeiture of the $20,455,829.10 involved in the money-laundering transaction.
Indictment Charging Perez-Zumaeta
Perez-Zumaeta has been charged in a ten-count indictment. Count One alleges that Perez-Zumaeta conspired with Chew and Icon to defraud USAC and the FCC of more than $25 million. Counts 2 - 6 allege wire fraud. Three of these counts relate to payments from USAC to Icon of over $7 million each. Counts 7 - 10 charge money laundering based on deposits of criminal proceeds into a PSPS Sales bank account.
In general, the indictment alleges that Perez-Zumaeta directed PSPS Sales personnel to use phone books to come up with names and addresses for bogus Lifeline customers and to dispose of telephones registered to fake customers by selling them on the street for approximately $5 each. Perez-Zumaeta is also alleged to have instructed PSPS Sales personnel to fabricate signatures of fictitious customers on approximately 40,000 recertification forms and to cover up the fabrications by using different pens, different hand-writing styles, and different formats for dates.
If convicted, Perez-Zumaeta could be imprisoned for 20 years on each of the conspiracy and wire-fraud counts and 10 years on each of the money-laundering counts. He would also be subject to a fine of up to $250,000 on each count, and mandatory restitution. Furthermore, the indictment seeks forfeiture of all proceeds of the alleged fraud and all property involved in the money-laundering transactions.
Perez-Zumaeta was arrested on April 25, 2014, at the San Francisco airport and is currently in federal custody. On May 16, he was ordered detained pending further proceedings after the Court found he presented a risk of flight.
"Although this program was designed to help low-income Americans have basic access to phone service, these individuals, and their companies, allegedly exploited the system to line their own pockets," said U.S. Attorney Coats. "All of us must be concerned when programs like this are abused and defrauded. I commend the FCC-Inspector General, FBI, and IRS Criminal Investigation for their cooperation and coordination in this investigation."
Said FCC Chairman Tom Wheeler, "The FCC’s adoption of tough, enforceable rules in 2012 to combat waste, fraud and abuse in Lifeline is paying off. Lifeline provides a link to jobs, family and emergency services for Americans who cannot afford phone service. I thank the Office of the Inspector General and our partners in the U.S. Attorney’s Office, IRS, and FBI for fighting fraud so that Lifeline can continue to help low-income Americans afford the basic phone service that most consumers take for granted."
This case is the result of an investigation by the Office of Inspector General for the Federal Communications Commission, the Federal Bureau of Investigation, and IRS Criminal Investigation. The cases are being prosecuted by Assistant U.S. Attorneys Chris M. Stephens and Scott E. Williams.
The public is reminded that these charges are merely accusations and that the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt. Reference is made to the information, the indictment, and other public filings for further information.