A massive fraud case involving the federal government’s Lifeline Program, which doles out “Obamaphones,” is beginning to unravel. A group of individuals, including a Mexican national from Cancun, stole more than $27 million from the government welfare program.
On November 7, the Mexican national, Oscar Enrique Perez-Zumaeta, admitted to a prominent role in the scheme; he plead guilty to laundering proceeds to defraud the federal government through the Obamaphone program. According to the FBI, five months ago the owner of ICON Telecom, Inc., Wes Yui Chew, plead guilty to illegally taking more than $27 million from the program.
Perez-Zumaeta and Chew allegedly worked together in the scheme.
The Lifeline program was created during the Reagan administration in 1985 to help poor Americans get access to telephones. It was dubbed the “Obamaphone” program because it has been significantly increased in size and scope since Obama became president. U.S. taxpayers shelled out $2.189 billion for the program in 2012, up from about $800 million prior to 2008 (when Lifeline began offering subsidized cellphones).
Critics have pointed out that the government-subsidized phone program is rife with fraud. According to the Wall Street Journal, in 2012 nearly half of the 6 million people who received the government-funded cell phones “either couldn’t demonstrate their eligibility or didn’t respond to requests for certification.”
Despite the fact that the federal government often fails to verify eligibility for the program, there are rules in place to ensure only the needy receive the welfare.
Lifeline gives subsidies to telephone companies who participate in the program. Before receiving such funds, participating companies are required to report the number of eligible Lifeline customers they have served to Obama’s Federal Communications Commission (FCC). The phone companies are then asked to file additional reports by January 31, every year, “to certify that customers who received Lifeline service at an earlier date remain eligible for the program,” according to the FBI.
ICON Telecom, owned by Chew exclusively, participated in the Lifeline Program. In late 2011, ICON reported having fewer than 12,000 customers who qualified for the subsidized phones. By that same time next year, however, the company reported having more than 135,000 customers who qualified. Between 2011 and 2013, ICON received $58,283,329 from the federal government for its involvement in Lifeline.
Chew allegedly worked with Perez-Zumaeta to rip off the feds. According to the FBI, Perez-Zumaeta owned PSPS Sales LCC, which supposedly recruited low-income individuals to apply for government-subsidized phones. ICON paid PSPS over $1 million between 2011 and 2013.
Perez-Zumaeta allegedly instructed his employees to enroll fake people in the Obamaphone program on behalf of ICON. The Mexican man did this by “forging Lifeline application forms” from names he found using a phone book, the FBI reported. He additionally instructed colleagues in Mexico to “falsify approximately 40,000 Lifeline recertification forms for use in ICON’s fraudulent scheme.”
On Friday, Perez-Zumaeta plead guilty to laundering $52,000 received from ICON.
Perez-Zumaeta is in federal custody for his alleged role in the scheme. He faces up to 10 years in prison.
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