Vitter Asks CEO Of Top Free Government Cell Phone Provider About Involvement With Misleading TV Ad

(Metairie, La.) -- This week, U.S. Senator David Vitter (R-La.) sent a letter to TracFone CEO F.J. Pollak requesting information regarding the company’s involvement in a television ad promoting the fraud-ridden free government cellphone program, known as Lifeline. Lifeline has benefitted Pollak’s company and other free cell phone providers financially because they are paid monthly from the program for each subscriber.

Most recently, an organization called the “Pre-Paid Wireless Users of America,” which Vitter suspects is associated with TracFone, has run a series of television ads claiming that eliminating Lifeline would hurt veterans and seniors.

“I’ve been fighting for over a year to get rid of the free government cell phone welfare program. Lifeline is costing taxpayers nearly $2 billion a year – its funding comes directly from consumers’ phone bills,” Vitter said. “It’s a welfare program with massive out-of-control fraud, but corporate exploiters like TracFone, are keeping it running through multi-million dollar ad campaigns.”

Vitter has also been communicating with Pollak for over a year, since introducing his May 2013 legislation to end the welfare subsidy for mobile phone service in the Lifeline program. A recent Federal Communications Commission (FCC) review of the top five companies receiving Lifeline support, with TracFone at the top, revealed that 41 percent of the six million who received the free cell phone service were not eligible for the program or didn’t respond to requests for eligibility certification.

TracFone is the top recipient of money from Lifeline, receiving $460 million from the program in 2012. TracFone’s efforts to obscure the fraud and wastefulness of the free government cell phone program have included running advertisements in the New Orleans Times-Picayune and creating Lifelinefacts.org, which includes no information about the rampant fraud within the program.

Below is the text of Vitter’s letter to TracFone CEO F.J. Pollak.

October 30, 2014

Mr. F.J. Pollak
CEO, TracFone
9700 NW 112th Avenue
Miami, FL 33178

Dear Mr.  Pollak:

I expect you’ve seen or heard the ads implying that those of us who oppose the Lifeline free cell phone program are out to get veterans and seniors. This ad campaign is an attempt to obscure the fact that Lifeline is rife with waste, fraud, and abuse. Worse, these ads exploit veterans to protect the billions of dollars of profit for companies who are more interested in expanding the program than rooting out the fraud. Using veterans to prop up a fraud-ridden program is a brazen attempt to keep this gravy train running for companies like TracFone, which received nearly $460 million from Lifeline in 2012.

I am also concerned with the amount of misleading “facts” and statistics at your website defending Lifeline, http://lifelinefacts.com/. For example, it includes this statement: “The phone is not paid for by taxpayers. Rather it is subsidized by the companies themselves.” While that may be technically true since Lifeline covers service and not the phones directly, obviously companies like yours would not be handing out phones if not for the government payments of $9.25 per customer per month, clearly an incentive to sign up as many people as possible.

Also, your website states that Lifeline “is not funded by tax dollars.” The Lifeline program that provides generous payments to TracFone is funded by a mandated charge to pay into Universal Service Fund. Most companies pass this on to customers, while some build it into their pricing, but to say this program is not funded by taxes is purely a word game. If a charge is mandated, it is a “tax,” regardless of legalese or Washington-speak.

With new cases of fraud reported on a regular basis, it is becoming clear that this program simply cannot be reformed and must be ended. Profit hungry companies such as TracFone have facilitated the rapid, fraudulent growth. You surely remember that TracFone was fined $4.6 million in September 2013 when the company, according to the FCC’s wording, “apparently willfully and repeatedly violated…the Commission's rules by requesting and/or receiving support from the Lifeline program of the Universal Service Fund (USF or Fund) for ineligible consumers for between the months of September 2012 and February 2013.” Of course, you probably barely noticed this fine, since it is only about one percent of the annual payments TracFone receives from Lifeline.

You and I have met personally, and you are the CEO of the top recipient of money from Lifeline, so I’m hoping you can help shed some light on the mysterious group, Pre-Paid Wireless Users of America, running the recent ads. This group’s website (www.pwua.org) has almost no information about the group or who is leading and funding the effort. Recently, The Washington Examiner featured a story about its investigation into the group, finding ties to DC-based consultants. Your company refused to answer questions for the recent stories, so please answer the following:

·         Is TracFone a member of Pre-Paid Wireless Users of America and, if so, how much money has TracFone contributed to the organization?
·         Have you or any other executive at TracFone donated to this group?  If so, how much?
·         How much does it cost TracFone to provide a customer with a phone through the Lifeline program?

There are so many cases of fraud within Lifeline that new stories arise so frequently they are difficult to keep track of them all. This month, The Washington Examiner highlighted another example of the massive fraud and waste from this program. According to reports from the Washington Examiner, the Lifeline program in Maryland grew 10,000 percent from 2009 to 2012 to 645,000 recipients, a number that is double the number of people who should be eligible. No government program with such a high rate of fraud should continue.

The ads from the secretive Pre-Paid Wireless Users of America group claim that “more than 1 million veterans depend on Lifeline.” Even if that is an accurate number, it represents less than 1/14 of total 14.3 million Lifeline accounts, according to USAC’s report from the end of 2013. Considering the revelation that Maryland, only one state, had 322,500 ineligible recipients, it is safe to assume that illegal duplicate subscribers nationwide greatly outpace the claimed number of veterans receiving the free phone service.

Lifeline started with the goal to ensure that everyone could have access to phone service in their home, but now it is just a runaway program to facilitate free government cell phone service. It is time to cut our losses and end the Lifeline wireless program instead of propping it up with ads from a secretive group that exploits veterans.

Sincerely,

David Vitter
U.S. Senator