Errors cost wireless provider $2M

Texas-based Blue Jay Wireless must reimburse the Federal Communications Commission $2 million for erroneously enrolling several thousand Hawaii customers in a subsidized cellphone plan meant only for residents of Hawaiian homelands.

The company must also hire a compliance officer, submit periodic reports to the FCC for the next three years and develop employee protocols to prevent future abuses of the federal Lifeline program, which is aimed at helping poor Americans stay connected to jobs, family and emergency assistance through essential phone services.

“This settlement makes clear that no Lifeline provider should turn a blind eye to potential fraud in the program,” said Travis LeBlanc, the FCC’s enforcement bureau chief, in a statement announcing the settlement last week.

The settlement and accompanying consent decree do not constitute an admission of wrongdoing by Blue Jay Wireless, and it’s not clear from the FCC’s two-year investigation whether the company or its customers are to blame for the errors.

Under the Lifeline program, telecommunications companies receive $9.25 per month for every qualifying low-income customer. The subsidy jumps to as much as $34.25 per month for low-income customers who are also living on tribal lands, including Hawaiian homelands. The government assistance program allows companies to offer free or discounted phone plans to poor customers.

Blue Jay Wireless had signed up several thousand customers under the Hawaiian homelands plan who were supposed to be enrolled only in the standard low-income plan, according to the FCC.

Under FCC rules, customers self-certify that they live on tribal lands “under penalty of perjury.” FCC spokesman Mark Wigfield said he couldn’t “comment on, confirm or deny” whether the FCC is also investigating customers. It’s standard practice for the agency not to comment on such matters.

The FCC is currently considering making the certification process for tribal lands customers more stringent.

The FCC investigation was initiated after an employee of the state Public Utilities Commission contacted the FCC in May 2014, questioning the number of Blue Jay Wireless customers who were claiming to live on Hawaiian homelands, according to the FCC’s consent decree.

Former PUC Commissioner Carl Caliboso, now a private attorney with Yamamoto Caliboso, had also questioned the company’s practices in a letter to the PUC in November 2014. He pointed out that 2010 U.S. census data listed 7,294 households living on Hawaiian homelands. However, in the first six months of 2014, Blue Jay Wireless had signed up about 11,000 customers who claimed to reside on Hawaiian homelands.

Only one Lifeline subsidy is allowed per household.

“The subsidies that Blue Jay is generating in HHL’s appear to be highly unlikely mathematically,” Caliboso write.

Caliboso also raised concerns about whether Blue Jay’s marketing tactics in Hawaii were aimed at steering local customers to the plan for Hawaiian homelands as opposed to the standard plan.

After concerns were raised about the company’s enrollment figures, and prior to the initiation of the FCC investigation, Blue Jay Wireless developed a geomapping software tool to help staff tell whether an applicant’s address was located on Hawaiian homelands. The mapping tool showed that many of its customers who were signed up for the tribal plan didn’t actually reside on Hawaiian homelands. The company then initiated a process on its own to convert the customers to its standard plan, according to the FCC.

Blue Jay Wireless said it was pleased with the settlement in a statement posted on its website.

“Blue Jay is committed to leading the industry in compliance and self-regulates to maintain the highest standards of compliance across all aspects of its business,” said Blue Jay Wireless CEO David Wareikis. “The consent decree shows that Blue Jay took voluntary proactive efforts to protect against possible fraud and would never turn a blind eye to potential fraud in the program.”

This is the second Lifeline enforcement action this year, according to the FCC. The commission announced in April that it planned to fine Total Call Mobile $51 million for enrolling tens of thousands of ineligible and duplicate customers across multiple states in the Lifeline program.

FCC Commissioner Ajit Pai said in a statement following the settlement with Blue Jay that the case “confirms that the Lifeline program still contains waste, fraud and abuse.”

“I can confirm that Blue Jay Wireless is one target of my ongoing investigation and that I flagged further suspicious conduct for the Enforcement Bureau’s investigation earlier this year,” Pai said. “I will continue to work with my colleagues, the Enforcement Bureau, the Inspector General and the Universal Service Administrative Company to end the abuse of taxpayer money by unscrupulous wireless resellers.”