Sprint just got busted for fraud and fined $200 million by the Federal Communications Commission. The FCC said it is the largest single penalty ever assessed to resolve an investigation and the money will go to the United States Treasury.
If you are anything like us, you might wonder exactly what a company might do to deserve such a stiff penalty.
On one hand, the answer is kind of unbelievable. On the other hand, it’s not. Sprint billed the government and continued collecting monthly subsidies for thousands of inactive Lifeline users.
FierceWireless.com has the details:
Sprint’s Lifeline issues at hand and the resulting investigation began last year as the company was still working to win merger approval with T-Mobile, and was first flagged by the Oregon Public Utility Commission.
The carrier had been claiming monthly subsidies under the Lifeline program for 885,000 subscribers, even though they were inactive and not using the service, violating the commission’s “non-usage” rule, an investigation by the FCC’s Enforcement Bureau found.
Many “experts” have tut-tutted and exclaimed their shock at the results of this investigation, but we are not shocked. Anyone who is familiar with the ObamaPhone program has suspected this kind of fraud for a considerable period of time.
We have heard countless comments from readers who cannot seem to get their service cancelled even when they request it from their service provider’s customer service team.
The FCC outlined how many accounts were involved And remember that ObamaPhone companies are paid $9.25 per customer per month. Multiply that by 885,000 customers and then multiply that by twelve months in the year and you have plenty of incentive not to cancel accounts even when customer wants them cancelled. FierceWireless.com report continues:
Sprint delivers wireless Lifeline service to millions of households under the brand Assurance Wireless. At the start of the investigation, the FCC said the 885,000 inactive Lifeline subscribers Sprint was getting paid for represented 30% of the carrier’s total Lifeline base and a full 10% of the entire Lifeline program’s subscribers.
As part of the announcement today, the FCC said Sprint agreed to enter into a compliance plan to make sure it follows the commission’s Lifeline rules in the future.
… From the start Sprint said it was committed to reimbursing federal and state governments for any subsidy payments that were collected as part of the error.
And while the $200 million is a record penalty, according to the FCC, it’s a far cry from investment analysts’ estimates at New Street Research last fall that said in addition to reimbursements, Sprint could face fines totaling in “the low billions of dollars.”
See if you can follow our math: 885,000 customers x $9.25 per month x 12 months in the year. That works out to $98,235,000. In other words, Sprint agreed to a fine amounting to just under two years of service for those customers.
In other words, scamming the government is a very lucrative business. That’s why we would not be surprised if additional Lifeline service providers get fine or charged with fraud in the future.