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FCC proposes $14M in fines over abuse of phone subsidy program

Five wireless carriers allegedly signed up thousands of consumers to multiple subsidies despite rules permitting one subsidy per person.

The Federal Communications Commission on Tuesday proposed fining five wireless service providers a total of $14.4 million for allegedly defrauding a federal phone subsidy program.

The goal of Lifeline, which offered hefty discounts on phone service to qualifying low-income households, was to ensure contact with families, employers, and emergency services. However, a review of the program conducted by The Wall Street Journal found that 41 percent of the 6 million people who benefited from Lifeline were unable to prove their eligibility or failed to answer requests for verification from their carriers.

The US government spent about $2.2 billion on Lifeline in 2012.

The FCC accused TracFone Wireless, Icon Telecom, Assist Wireless, Easy Wireless, and UTPhone of defrauding the system by knowingly signing up thousands of consumers to multiple subsidies despite rules that permitted only one subsidy per person.

"Collecting support for duplicate Lifeline service -- the practice we address in these cases -- is not only illegal, it diverts resources from legitimate users of the program and is unquestionably within the power and duty of Lifeline providers to prevent," acting FCC Chairwoman Mignon Clyburn said in a statement provided to The Hill. "It must stop."

TracFone, which is owned by Mexican billionaire Carlos Slim, denied breaking FCC rules.

"We do not believe that our conduct violated any rules or that the proposed FCC action is warranted," the company said in a statement. "We believe that we have the most sound program in the industry when it comes to wireless Lifeline."

Under reforms adopted by the commission in January 2012, Lifeline subscribers must show documentation about their income, and carriers are required to recertify them every year.