Sued for millions in unpaid interest
August 5, 2013
Carlos Slim, named the world’s wealthiest man for four consecutive years, is the mastermind entrepreneur behind the U.S. government assistance program Assurance Wireless, also known as the Lifeline Assistance program.
According to the program’s website, around eight million people are currently subscribed to and are receiving complimentary phones supplied to them by the following providers: Safelink Wireless, Assurance Wireless, Q Link Wireless, Care Wireless and Reach Out Wireless.
The affluent Mexican capitalist, who has an estimated net worth of $73 billion, is the owner of the Mexican telecommunication company América Móvil, which provides mobile service to 17 Latin American countries and is headquartered in Mexico City.
TracFone, a subsidiary of América Móvil, is the provider of what’s widely become known as the “Obama phone,” which went viral after a Cleveland woman crashed a Romney campaign voicing her support for the man who helped her obtain a complimentary government cellphone. The Obama lady, Michelle Dowery, also appeared on the Alex Jones Show last January.
The Obama phone, an effective tool that helped the candidate gain leverage in the 2012 election, is a TracFone product stemming from the government program Lifeline, which generated a whopping $452 million last year.
Currently, TracFone is the largest recipient of funding for the Lifeline Assistance Program that began under the Reagan administration nearly 30 years ago. The company expanded under the George W. Bush administration, transitioning from providing landlines to wireless programs including broadband service, to low-income families.
The Lifeline program is overseen by the Federal Communications Commission (FCC), generating its funding by tacking on mandatory fees to consumers’ cell phone bills.
In a July Politico report the spokesman and federal lobbyist for the Miami-based TracFone, Jose Fuentes, said he’s had enough of the criticism over the government funded program.
“A lot of this misinformation was generated by Washington lawmakers themselves. And a few members have picked up on this issue and made it a political one to score points back in their districts,” said Fuentes.
While the program’s website claims subscribers are required to meet certain qualifications including being the recipient of at least one government assistance program, outrage ran rampant after innumerable accounts surfaced revealing thousands received free cell phones who failed to meet the program’s criteria.
National Review reporter Jillian Kay Melchior said that “just about anywhere low-income residents can sign up for food stamps, there’s a vendor selling his stash of Obama free phones.”
Louisiana Sen. David Vitter (R-LA) has become one of the program’s most boisterous critics calling the program “out-of-control” and a “fraud-ridden entitlement program that spoils what should be a worthwhile helping hand.”
On May 7, Sen. Vitter proposed legislation that would “prohibit universal support of commercial mobile service through the Lifeline program,” the bill has been referred to the committee.
Vitter told Politico in an email that “TracFone is upset because I’m fighting to end this program, which would also end their corporate welfare.”
TracFone makes approximately $10 per month per customer earning nearly $450 million a year in federal support payments. The company stands to profit even more under the roll out of Lifeline’s newly offered broadband service.
An April Bloomberg report cites additional program critic Arkansas Rep. Tim Griffin as saying, “It’s not fair that people save and work and pay for phones from whatever funds they have, and other people get them for free.”
“It’s not fair the biggest beneficiary of this is Carlos Slim, the billionaire owner of TracFone,” said Griffin.
Fuentes says it doesn’t matter who owns the company, and tells Griffin that he “needs to focus on finding jobs,” and not on a valuable program.
The program has increasingly gained negative attention after its profits exploded from earning $772 million in 2008 to over $2.2 billion last year.
Following public outrage, the FCC moved to “trim” the program last year, vowing to ensure that applicants would no longer be able to receive multiple phones.
In January, Sprint told the FCC that they were unable to verify eligibility for 44 percent of its Lifeline subscribers, while AT&T said they dropped 47 percent of its subscribers after they also failed to verify eligibility.
In a recent twist, a California public utility regulator has ordered TracFone Wireless to pay $24.4 million in unpaid fees and interest.
According to the StarTribune, the Consumer Protection and Safety Division said the company failed to collect “user fees from 2004-12, or pay surcharges for public programs, like the Deaf and Disabled Telecommunications Program, from 2000-12.”
The company has 30 days to appeal the decision.
The StarTribune reports, “An email seeking comment from TracFone wasn’t immediately returned and there was no answer at their listing.”