Obamaphone program: Dialing for fraud?

An activist contends the FCC's Lifeline benefit, which aims to help low-income Americans pay for a phone, is widely abused.

By Aimee Picchi Jun 18, 2013 11:49AM

Frustrated woman with mobile device © Jacqueline Veissid, Photodisc, Getty ImagesThe so-called Obamaphone project has a noble goal to help low-income Americans pay for mobile phones, allowing them to have contact numbers for job interviews or to access emergency services. 

But now conservative activist James O'Keefe is alleging that the program is prone to fraud. Undercover cameras taped salespeople telling applicants for phones under the Federal Communications Commissions' Lifeline program that once they get a device, they can do whatever they want with it, including selling it. 

One employee at a Stand Up wireless location in Philadelphia looked the other way when an undercover actor said he was going to sell the phone for heroin. "Hey, I don't judge," the employee said. 

At another location, a saleswoman in an outdoor tent operated by Stand Up Wireless told an actor to take the phone to a pawn shop to find out its worth. One undercover actress told a salesperson at a TerraCom store that she wants to sell the phone to buy an "awesome pair of shoes."

It's the latest investigation into unethical behavior from O'Keefe, who drew national attention in 2009 when he taped workers at Acorn offices appearing to give advice on how to sidestep the authorities when engaging in illegal behavior, such as tax evasion and prostitution.


The Obamaphone program isn't cheap. Lifeline cost $2.2 billion last year, up from $819 million in 2008, according to The Wall Street Journal. The program is subsidized by U.S. taxpayers, who pay an average monthly fee of $2.50 per household on their phone bills to support it.

O'Keefe's investigation has hit upon a benefits program that already has no lack of detractors. (The term Obamaphone is actually a misnomer, since the Lifeline program started in 1984 under President Ronald Reagan.) 

More than 40% of the low-income customers enrolled via the top five Lifeline carriers -- which include AT&T (T) and Verizon Communications (VZ) -- either couldn't demonstrate they were eligible or didn't respond to certification requests, according to the newspaper's investigation.

Some carriers are profiting from the program, the Daily Mail reports. Global Connection, the parent of Stand Up Wireless, has taken in more than $38 million for the subsidized phones, while TerraCom Wireless has booked $168 million for its services, the publication notes. 

A spokesman for TerraCom told the Mail that the salesman in the O'Keefe video would likely be fired. "We will immediately look into this matter," he said. "This kind of behavior is not acceptable, and swift action will be taken to address this situation, including the employee's termination from TerraCom."

Global Connection said it is committed to following the law. 

One thing is certain: The program is facing political pushback. Sen. David Vitter, R-La., and Rep. Scott Griffin, R-Ark., told the Daily Mail they want to remove mobile phones from Lifeline, which was originally meant for landlines.

Vitter said, "The free government cellphones issue just keeps getting more outrageous."

Follow Aimee Picchi on Twitter at @aimeepicchi

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Jun 18, 2013 12:26PM
When this program started there were no cell phones, it provided landlines which cost about $25 per month. Why should it apply to cell phones today when landlines are still available and still can be had for about $30 per month. As a taxpayer I resent paying for this type of program to begin with, but I resent it even more that it is providing a "luxury" such as a cell phone instead of a "necessity" landline which is far cheaper to provide.
Jun 18, 2013 12:32PM
my healthcare insurance went up 20% this year, but the freeloaders got a new phone. Nice
Jun 18, 2013 12:38PM
STOP this program now.  This is only one small example of wasteful government spending.  These people can get landlines if they can't afford cell phones.  We the taxpayers don't owe anyone free cell phones or service...give me a break!!!
Jun 18, 2013 12:41PM
These Obamaphones are fancier, better, and "smarter" than the phone I have.  Oh, that must be because only Me, Myself, and I pay for the entire cost of my phone.
Jun 18, 2013 12:39PM
What?  Massive fraud and waste in a federal entitlement program?  No way.  That never happens.....
Jun 18, 2013 12:53PM
! million Obama phones won the presidential election in Ohio
Jun 18, 2013 12:43PM
Imagine that... fraud in a government sponsored entitlement program. Who'd a thunk it?
Jun 18, 2013 12:47PM
C'mon now everybody has to pull together to help the poor black people, after all they are trying so hard to get ahead! Hahahahahahahah. NOT!
Jun 18, 2013 1:00PM
This is the second dumbest thing I've heard of. (the first was Obama's 2nd term)  Turn this program over to the private sector. My Tracfone cost about $20.00 to purchase and less than $9.00 a month to use, if people cant afford this they need to change their lifestyle. Hey a few fewer burgers or cigerettes or beers, they could get a decent phone.
Jun 18, 2013 12:42PM

Surprise, surprise.  The government program is giving out free stuff, and it is not properly administrating its program to account for costs.  Nothing new here.  And there is not a damn thing that any of us can do about this.  Or anything else.  Stop fooling yourselves. 


Hey, I have an idea, maybe Congress can pass a law saying that it is illegal for NSA to monitor or tap Obama phones.  They can only tap phones of people who pay for phones themselves.  And why not?  Dont you realize that these power mad government officials have been spitting in your face and laughing at you for decades?  BECAUSE THEY CAN.  BUT ONLY BECAUSE YOU LET THEM.  Think about it. 

Jun 18, 2013 12:51PM
shocking. who would have thought the people getting free stuff from those of us who have to pay would ever abuse the system. that is the problem with socialism.. why should those people try to work for anything when odumba will just give them free stuff. think i need to quit working. who gets free money for house payments and their balances lowered??? the people who quit paying, they get rewarded for not paying. i guess the suckers are those of us who actually make our payments, and actually work to pay for what we want.
Jun 18, 2013 12:57PM
When free stuff and money for nothing is widely available,abuse and fraud are inevitable. The ever expanding welfare is on a collision course with reality. Ultimately unsustainable.
Jun 18, 2013 12:36PM

Everything Obama has done is fraud laden.

Now this spit in the eye wanting to have talks with the Taliban, Please.

I think that the entire military should lay down their weapons and walk away. When we have to negotiate or talk with an enemy that has killed so many of our young boys. It is time to quit.

I will also say if the military want combat girls and Gay little boys and girls then all the folks that have balls should opt out.

Jun 18, 2013 12:53PM
Jun 18, 2013 12:55PM
What did you expect. I would say that great majority of the liberal so called freebees are abused. Anytime you give something away that does not have to be earned, it is usually squandered. Phones and phone service is no different. Why do you thing we have such a problem with Welfare. If you don't have to work for it, then you don't respect it, and when you don't respect it you don't give a damn how much you spend. That has been the problem with liberalism for many years. Liberalism as designed by the government is very simple. If I give you something, then you will vote for me because if you don't It will be taken away from you. Welcome to Obama's Socialist America. Basic landline service is still cheaper than a cell phone.
Jun 18, 2013 12:45PM

The name is stupid and the program is even stupider. Wonder if it will fail or be financially segregated as His OBAMACare is!!!!!!!!


Got money you will gain better service and privacy---if not Oh Well! 

Jun 18, 2013 12:53PM
F'N IDIOTS>>>>>>>>>>GO FIGURE!!!!!!!!!!! 
Jun 18, 2013 12:59PM

It might have been a good idea if we lived in a world where there wasn't an overabundance of selfish narcissistic people walking around that are constantly trying to cheat other's and take advantage of ideas like this to benefit themselves.  Too bad I guess.  If only the human race wasn't a complete failure.  Maybe long after the planet boot's us all off another sentient species will evolve without all the burden's of human nature and an idea like this might work.  That's a stretch of course.

Jun 18, 2013 12:58PM

Big deal. It's only 2.2 Billion dollars yearly and growing. The government needs to get rid of it's big surplus of money somehow. It's not like these programs put us in debt or anything. It's these poor people who pay most of the federal income tax, you know. We should be happy to reward them with a few goodies.

Jun 18, 2013 12:48PM

PS Obama I don't have or want a Cell Phone and Life is so much better without constant connections, rudeness and accident risks!


I get to enjoy LIFE more w/o one!!!!!!!!


BTW: Obama Your dependence on technology is out of line and highly risky to all Americans!

Just look at what It has done to our children who currently cannot function with their tech toys!!

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