Authorities discovered that American Broadband had made more than 42,000 fraudulent claims for funding in one month alone in 2016 — in some cases using the names of dead people or quietly changing the birth dates or Social Security numbers associated with living people.
American Broadband’s chief executive, Jeffrey Ansted, was also held personally liable for the alleged misconduct Tuesday as the FCC accused him of embezzling aid money and using it to pay for luxury goods such as an $8 million private Cessna jet, a $1.3 million Florida condominium and a $250,000 Ferrari convertible. He also used the funds to buy memberships to yacht and country clubs, the FCC said.
Calling Ansted’s behavior “apparent fraud,” FCC Chairman Ajit Pai said the fine is the largest penalty the agency has ever proposed for a violation of its rules governing universal service support. On top of the fine, the company could be subject to further penalties such as refunds of the money it allegedly stole from federal coffers.
“Month after month the company apparently sought funding for accounts that it knew were ineligible to receive Lifeline benefits,” Pai said.
“It would be hard to describe a more brazen or textbook example of fraud,” said FCC Commissioner Brendan Carr, “particularly when the entire purpose of the Lifeline program is to benefit low-income individuals.”
American Broadband did not immediately respond to a request for comment.
Under the Lifeline program, eligible low-income phone customers can register with carriers for a $9.25 monthly discount on phone or Internet service. The subsidies, which go to carriers and are passed through to consumers, are paid for out of a much larger federal fund that gave out $8.8 billion last year in support, including Internet subsidies for schools and libraries as well as infrastructure deployment in needy areas. Contributions to the fund come from fees that appear on consumers' monthly phone bills.
For years, critics of the Lifeline program have alleged widespread waste, fraud and abuse. Pai’s announcement Tuesday appeared to target those claims, though supporters of the program have said Lifeline has made significant progress in recent years in curbing the excess.
The proposed fine also comes as the FCC is weighing dramatic changes to Lifeline that could sharply curtail the ability of companies such as American Broadband to participate in the program. The part of the FCC proposal to exclude “wireless resellers” is opposed by wide swaths of consumer groups and the telecom industry, over concerns that it could leave many Lifeline subscribers without a provider.
“Last year, this agency announced plans to gut Lifeline service in a manner that could cut 70 percent of its current subscribers,” said FCC Commissioner Jessica Rosenworcel in a statement Tuesday. “When companies cheat the Lifeline program, we need to make clear there are consequences … [but] let’s not cut off the millions of Americans who count on this program to stay connected every day.”