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Justice News

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Thursday, December 22, 2016

Manhattan U.S. Attorney Announces $30 Million Settlement With Total Call Mobile For Defrauding Government Program Offering Discounted Mobile Phone Services To Low-Income Consumers

Total Call Mobile Admits to Seeking and Receiving Reimbursement for Tens of Thousands of Ineligible Consumers and Agrees to Cease Participating in the Government Program

Preet Bharara, the United States Attorney for the Southern District of New York, and Travis LeBlanc, Federal Communications Commission (“FCC”) Enforcement Bureau Chief, announced today a $30 million settlement of a civil fraud lawsuit against TOTAL CALL MOBILE, LLC (“TOTAL CALL”), for defrauding the Lifeline Program, a federal government subsidy program that offers discounted mobile phone services to eligible low-income consumers.  TOTAL CALL, based in Gardena, California, has enrolled Lifeline subscribers in 19 states and territories.  The United States’ Complaint alleges that Total Call, with the knowledge and involvement of its affiliate, co-defendant LOCUS TELECOMMUNICATIONS, LLC, and their shared corporate parent, co-defendant KDDI AMERICA, INC., knowingly submitted false claims for federal payments by seeking reimbursement for consumers who did not meet Lifeline eligibility requirements.  As part of the settlement, TOTAL CALL admitted and accepted responsibility for conduct alleged in the Complaint, including seeking reimbursement for tens of thousands of ineligible consumers, and agreed to no longer participate in the Lifeline Program.  The payment also resolves an administrative investigation conducted by the FCC, and the FCC has entered into a separate administrative agreement with TOTAL CALL as part of this global settlement.

Manhattan U.S. Attorney Preet Bharara said:  “By routinely looking the other way while its sales agents repeatedly engaged in obvious fraud, Total Call Mobile undermined the goals and depleted the resources of a federal subsidy program designed to provide discounted phone services to low-income individuals.  While it certified its compliance with FCC rules, Total Call enrolled and claimed federal payments for tens of thousands of consumers who did not qualify for the program.”

FCC Enforcement Bureau Chief Travis LeBlanc said:  “We have no toleration for fraud.  This unprecedented $30 million settlement along with a permanent ban from the Lifeline Program affirms our commitment to pursue the strongest sanctions for those who defraud or abuse the Universal Service program.  We thank our partners at the Department of Justice for working with us to make sure that companies that commit fraud are held accountable to the fullest extent of the law.”

To be eligible for the Lifeline Program, a consumer must have income that is at or below 135% of the Federal Poverty Guidelines or participate in one of a number of specified federal, state, or Tribal assistance programs.  Eligible Telecommunications Carriers (“ETCs”), such as TOTAL CALL, receive monthly federal payments for providing discounted phone services to qualified consumers.  As a condition of receiving these payments, an ETC must comply with regulations established by the FCC, which, among other things, require the implementation of policies and procedures for ensuring that enrolled subscribers are eligible for the program and that households do not receive more than one Lifeline phone.  ETCs must certify their compliance with Lifeline rules as part of an annual reporting requirement and with each monthly request for payment.

As alleged in the Complaint filed in Manhattan federal court:

TOTAL CALL relied primarily on in-person sales events to enroll consumers in the Lifeline Program.  The company contracted with “master agents,” who in turn hired “field agents” to engage in face-to-face marketing at public events and spaces.  These field agents were expected to enter electronically a consumer’s demographic information and capture images of the consumer’s proof of identification and proof of eligibility for the Lifeline Program (e.g., Medicaid card, food stamp card).  TOTAL CALL had access to the information entered by the field agents. 

TOTAL CALL, with the knowledge and involvement of the other defendants, engaged in a widespread practice of seeking federal reimbursement for consumers who did not meet Lifeline’s eligibility requirements.  TOTAL CALL field agents employed a range of fraudulent enrollment practices, including repeatedly using the same eligibility proof to enroll multiple consumers, tampering with identification or eligibility proof documentation, intentionally altering the way consumer information was input so as to avoid the detection of duplicate subscriber enrollments, and submitting false consumer addresses and social security numbers.  Although TOTAL CALL’s managers were notified that high volume field agents were engaging in blatantly fraudulent enrollment practices, TOTAL CALL continued to approve and seek federal reimbursement for consumers enrolled by these agents.

In addition, defendants failed to implement effective procedures and systems for preventing the enrollment of duplicate or otherwise ineligible Lifeline subscribers.  In many instances, even a cursory review of the submitted information and documentation or a straightforward search of the existing customer database would have shown that an application was faulty and should be denied.  However, to maximize enrollments and meet its aggressive sales targets, TOTAL CALL approved applications with little or no scrutiny, and then submitted grossly inflated reimbursement requests with false certifications of compliance with Lifeline rules.

Today, U.S. District Court Judge Jed S. Rakoff approved a settlement stipulation to resolve the Government’s claims against the defendants.  Under the settlement, defendants are required to pay approximately $22.54 million to the United States, and to forego payment of approximately $7.46 million in Lifeline reimbursements claimed by TOTAL CALL but held by the Government pursuant to a prior FCC Order.  Further, TOTAL CALL has agreed to cease providing Lifeline services by December 31, 2016, and not to participate in the Lifeline Program in the future. 

As part of the settlement, TOTAL CALL admits, acknowledges, and accepts responsibility for the following conduct:

  • TOTAL CALL failed to implement effective policies and procedures to ensure the eligibility of the subscribers for whom TOTAL CALL requested reimbursement for Lifeline discounts, as required by Lifeline rules.
     
  • For much of the period from September 2012 to May 2016, defendants allocated insufficient staff and resources to verifying the eligibility of Lifeline subscribers, and failed to adequately screen and train the field agents. 

     

  •  Hundreds of TOTAL CALL field agents engaged in fraudulent practices to enroll consumers who were duplicate subscribers or who were otherwise not eligible for the Lifeline Program.  TOTAL CALL failed to put in place effective mechanisms to oversee the conduct of field agents and detect and prevent field agent abuses. 
    • Certain field agents repeatedly used the same benefit program eligibility proof to enroll multiple consumers.  Agents frequently enrolled several different individuals by submitting an image of the same improperly obtained program eligibility card or, in some instances, a fake program eligibility card. 
    • Certain field agents slightly altered the way in which a subscriber’s demographic information was input to avoid having TOTAL CALL identify the application as a duplicate. 
    • Certain field agents tampered with identification or program eligibility cards, and intentionally transmitted blurry or partial images of the documentation, to try to conceal the fact that the information on the documentation did not match the subscriber’s actual name or the other information on the Lifeline application. 
    • Certain field agents provided their own signature, printed their own name, or wrote a straight or curvy line where the prospective subscriber’s signature was supposed to appear on Lifeline applications. 
    • Certain field agents submitted false consumer addresses and social security numbers to enroll duplicate or otherwise ineligible subscribers. 

       

  • At the time that TOTAL CALL submitted many of its monthly remittance requests, TOTAL CALL knew that its policies and procedures for reviewing Lifeline applications, verifying consumer eligibility, conducting duplicate checks, and detecting duplicate subscribers were deficient. 

     

  • TOTAL CALL sought and received reimbursement for tens of thousands of consumers who did not meet the Lifeline eligibility requirements.

 

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.

Mr. Bharara thanks the FCC’s Office of Inspector General and the FCC’s Enforcement Bureau for their investigative efforts and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Jeffrey K. Powell and Jessica Jean Hu are in charge of the case.

Press Release Number: 
16-349
Updated December 22, 2016