By David Shepardson
WASHINGTON (Reuters) -TracFone Wireless agreed to a $13.4 million settlement to resolve false claims allegations in connection with the Federal Communications Commission's (FCC) low-income subsidy program, the U.S. Justice Department said on Monday.
The department said TracFone, a Verizon Communications (NYSE:VZ) unit, violated the False Claims Act by signing up more than 175,000 ineligible customers in connection with the FCC's Lifeline Program, the Justice Department said in a statement.
The Justice Department said sales agents in Florida learned TracFone's computer software contained a glitch allowing ineligible persons to enroll in Lifeline. After TracFone eventually discovered the software glitch in August 2015, it repaid more than $10.9 million to Lifeline, an amount credited as part of the settlement.
Verizon spokesman Rich Young said Monday "TracFone reported these activities to the government years ago and we're pleased to now bring this matter to a close." He said Verizon "is focused on bringing all of TracFone's customers, including those enrolled in Lifeline, best in class products and services."
FCC Chairwoman Jessica Rosenworcel said in a statement the settlement should "serve as a warning to others that we will do everything we can to ensure strict compliance with the rules of the road.
Under the settlement, TracFone agreed to enter a "comprehensive, three-year compliance agreement."
Verizon said in September 2020 it would buy pre-paid mobile phones provider TracFone, then a unit of Mexican telecom company America Movil (NYSE:AMX), in a cash and stock deal worth up to $6.9 billion. The deal closed in late 2021 after Verizon agreed to conditions including agreeing to participate in Lifeline for at least seven years and offering existing TracFone Lifeline rate plans for at least three years.
TracFone is one of the largest providers of telecommunications services under the government subsidy program known as Lifeline with around 1.7 million low-income subscribers in 43 states.
TracFone serves about 21 million customers. Verizon is the largest U.S. wireless carrier by subscribers. Lifeline in total provides about 5.8 million Americans with free or discounted broadband and voice services as of 2021.