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Federal government charges Oklahoma telephone company, its owner and vendor with fraud

Fake customer names and certification documents are at the center of a $25 million scheme by Icon Telecom Inc., its owner and a vendor to defraud the Lifeline telephone program for low-income households, federal prosecutors said Wednesday.
by Paul Monies Modified: June 4, 2014 at 10:04 pm •  Published: June 4, 2014

An Oklahoma telephone company, its owner and a vendor have been charged by federal authorities in a $25 million scheme to defraud a federal telephone subsidy program for low-income customers, officials said.

Wesley Yui Chew, Icon Telecom Inc. and a Mexican national, Oscar Enrique Perez-Zumaeta, were charged in federal court in Oklahoma City in cases involving the federal Lifeline fund. Money for the program comes from Universal Service Fund fees added to telephone customer bills.

Authorities said Chew, 53, and Icon conspired with Perez-Zumaeta, 55, to get fraudulent reimbursements from the Lifeline administrator, Universal Service Administrative Co. The scheme involved fake customer lists and recertification forms.

The Lifeline program has exploded in recent years as it expanded from landlines to wireless customers. Reimbursements from the Lifeline fund to phone companies grew from $800 million in 2008 to $2.2 billion in 2012. It has been the subject of several state and federal investigations alleging waste, fraud and abuse in the program.

Only one Lifeline service is allowed for each qualifying low-income household. In exchange for providing affordable phone service for low-income customers, telephone companies receive monthly Lifeline reimbursements of $9.25 per customer. An enhanced version of the program for residents of former tribal lands, such as most of Oklahoma, provides monthly reimbursements of $34.25 per customer.

According to the federal charges, Icon and Chew contracted with Perez-Zumaeta and his company, PSPS Sales LLC, which received $7 to $15 for each new Lifeline customer. Icon paid more than $1 million in commissions to PSPS Sales from December 2011 to April 2013, prosecutors said.

Perez-Zumaeta, of Cancun, Mexico, directed his employees to go through phone books to find names and addresses for bogus Lifeline customers, and then sold wireless telephones registered to fake customers on the street for $5 each, prosecutors said. PSPS Sales employees in Mexico forged about 40,000 signatures of customers for recertification forms needed for continued participation in the Lifeline program, according to the indictment.

Prosecutors said Chew and Icon made false statements in applying for reimbursements from the Lifeline administrator. Icon had 2,200 wireless customers in the Lifeline program in September 2011, but that number grew to more than 135,000 customers by November 2012, according to the charges.

From 2011 to 2013, Icon received more than $58.2 million in Lifeline reimbursements at the monthly tribal lands rate of $34.25 per customer, prosecutors said.

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