Miami-based telecommunications carrier TracFone Wireless Inc. will pay $13.4 million to settle allegations that it violated the False Claims Act. The settlement resolves a who tam, or whistleblower, lawsuit, which was filed by Farrell Gordon. Gordon will receive $462,500 as a whistleblower award.
the who tam Provisions of the False Claims Act allow private citizens to sue on behalf of the government if they know of an individual or company that is defrauding the government. Who tam whistleblowers are eligible to receive between 15 and 30% of government recovery, where applicable.
According to the April 4 press release, the U.S. government alleged that between 2012 and 2015, TracFone “unacceptably enrolled more than 175,000 subscribers” who were ineligible for the Federal Communications Commission’s (FCC) Lifeline program. ). Lifeline, established in the Telecommunications Act of 1996, “provides nearly $2 billion each year to help low-income consumers with their telecommunications needs. In many cases, this is a free cell phone (provided by the operator) and a free monthly mobile phone service (provided by the government). An individual’s “income must be at or below 135% of the federal poverty guidelines” or they “must be receiving benefits from certain specified federal assistance programs” in order to qualify for Lifeline.
Apparently, TracFone “hired independent third-party sales agents, including agents hired by Elite Promotional Marketing Inc. (Elite), to enroll” customers who were not eligible for Lifeline. Sales agents “learned that TracFone’s computer software contained an issue that allowed ineligible individuals to enroll in Lifeline. Some agents in Florida then exploited the problem to increase their consumer registrations and commission payments.
According to the government’s allegations, TracFone “did not adequately review applications and failed to properly investigate reports from clearly ineligible subscribers enrolled in the program who allegedly revealed the problem.” TracFone discovered the issue in August 2015, and the press release states that the company “reimbursed more than $10.9 million to Lifeline, an amount that was credited as part of the $13.4 million settlement. “.
The case arose from a who tam lawsuit filed by Farrell Gordon, who worked as a Lifeline sales representative at Elite. “Elite has previously settled with the United States for $95,000 based on its ability to pay,” the press release reports.
“Lifeline providers have a duty to ensure that only eligible subscribers are enrolled in the Lifeline program,” said Assistant Deputy Attorney General Michael D. Granston of the Civil Division’s Commercial Litigation Branch. “Today’s settlement demonstrates our commitment to ensuring that those who participate in government-funded programs exercise appropriate due diligence to prevent the misuse of taxpayer dollars.
The law on false declarations in 2021
The DOJ released fiscal year 2021 data on the False Claims Act and reported that whistleblowers helped the DOJ recover $1.6 billion in settlements in the last fiscal year.
However, “the DOJ only paid out $237 million to whistleblowers, the lowest one-year total since fiscal year 2008.” WNN reports. Whistleblowers’ attorney Stephen M. Kohn said the FY2021 totals “reflect a troubling trend in recent years… The DOJ has begun treating whistleblowers like second-class citizens. It routinely dismisses cases of strong whistleblowers without cause. While the SEC and CFTC are making great strides with their whistleblower programs, the Department of Justice is backtracking. Read the full article on the False Claims Act for fiscal year 2021 here.
Read the press release here.
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