Feds Bust Up Alleged $25M Lifeline Fraud
OKLAHOMA CITY (CN) - An Oklahoma telecommunications company made more than $25 million in phony claims under the federal Lifeline wireless subsidy program, federal prosecutors say.
Wesley Chew, of Edmond, Okla. was charged with money laundering, in a criminal information. His company, Icon Telecom Inc., of Oklahoma City, was charged with making false statements to Lifeline auditors.
Chew allegedly transferred $20.4 million on April 9, 2013, from an Icon account to a personal account. If convicted, he faces up to 10 years in federal prison and a fine of $250,000 or twice the amount of any criminally derived property involved in the transfer, whichever is greater.
Prosecutors said Icon participated in the Lifeline program from July 2011 until September 2013. The program provides subsidies for telephone service for low-income people.
Wireless telephone companies usually receive a subsidy of $9.25 per month per qualifying customer, unless they live on tribal lands. In that case, they receive $34.25 per month for each customer. Prosecutors said much of Oklahoma qualifies for the higher subsidy.
"It is alleged that in September 2011, Icon reported fewer than 2,200 wireless customers who qualified for the Lifeline program," prosecutors said in a statement. "By November 2012, that number had grown to 135,364. It is alleged that Icon always claimed subsidies at the 'Tribal Lands' rate of $34.25 per customer per month. Although it had fewer than 10 full-time employees, it is alleged that Icon received a total of $58,283,329 through the Lifeline Program during 2011, 2012, and 2013."
Also on Wednesday, Oscar Perez-Zumaeta was charged in a separate indictment with conspiring to defraud the Universal Service Administrative Company, the independent administrator of Lifeline. He also faces five charges of wire fraud, three counts relating to payments from USAC of more than $7 million each and four counts of money laundering.
Icon recruited new customers by relying "almost exclusively" on Perez-Zumaeta's company, PSPS Sales LLC, prosecutors said in the statement.
"Icon paid PSPS Sales from $7.00 to $15.00 for each new customer," prosecutors said. "From December 2011 through April 2013, Icon paid more than $1,040,000 to PSPS Sales."
According to his 21-page indictment, Perez-Zumaeta told his employees to go through phone books to come up with names and addresses for bogus Lifeline customers, then get rid of the phones by selling them on the street for $5 each.
"When Icon needed to recertify Lifeline customers' continued eligibility in late 2012, Perez-Zumaeta directed PSPS Sales team members in Mexico to falsify approximately 40,000 recertification forms for fictitious and ineligible Icon customers," the indictment states. "Chew knowingly filed a falsely inflated Form 555 that overstated Icon's legitimate customer base."
If convicted, Perez-Zumaeta faces up to 20 years in federal prison on each conspiracy and wire fraud charge and 10 years on each money laundering court. He also faces up to $250,000 in fines on each count and mandatory restitution. He was arrested on April 25 at an airport in San Francisco and is in federal custody.
An Oklahoma City phone number listed under Icon Telecom was disconnected Wednesday afternoon.