The universal service charge, one of those pesky fees on phone bills, is supposed to subsidize phone lines for rural or impoverished Americans.
But a new federal indictment says it also paid for a private jet, a 28-foot boat and six luxury cars for a trio of phone company owners accused of defrauding the federal Lifeline program out of more than $32 million.
Leonard I. Solt, 49, of Land O'Lakes, Thomas Biddix, 44, of Melbourne and Kevin Brian Cox, 38, of Arlington, Tenn., all face federal criminal charges.
Lifeline, created under President Ronald Reagan and expanded under President George W. Bush to include mobile phone service, lowers phone bills for the poor by $9.25 a month. Phone companies screen the needy, grant discounts and seek reimbursement from the Universal Service Fund, which gets its money from the fees of ordinary subscribers.
A grand jury indictment unsealed Thursday in Tampa alleges that the three men overstated the number of poor clients served by five corporately linked companies that did business as American Dial Tone, Bellerud Communications, BLC Management, LifeConnex Telecom and Triarch Marketing.
Federal Communications Commission spokesman Mark Wigfield said the companies offered low-cost mobile phone service - in some cases at a rate that was entirely offset by the subsidy.
They are no longer certified to operate in Florida, after a parent company failed to pay most of a $4 million fine in a 2011 settlement negotiated with the Public Service Commission that also related to Lifeline claims.
Biddix was board chairman of the holding company, Melbourne-based Associated Telecommunications Management Services, which acquired LifeConnex from Solt, the indictment states. Cox is described as an "undisclosed owner."
Solt could not be reached for comment. A woman at his Pasco County home repeatedly hung up on Thursday. An attorney for Biddix did not respond to an interview request.
The indictment charges the defendants with one count of conspiracy to commit wire fraud and 15 substantive counts of wire fraud, false claims and money laundering.
In an 18-month stretch from 2009 to 2011, the phone companies obtained more than$46 million through the Lifeline program, the record states.
The government wants $32.4 million back, along with alleged spoils that include an orange Lamborghini, a red-bronze Chevrolet Corvette, a black Cadillac Escalade, a Chevrolet Suburban limo, a black Mercedes Benz S63 and a blue Audi R8.
Employees of a pawn shop operated by Biddix saw vehicles hauled away on flatbed trucks Thursday as federal agents descended on the Melbourne business, Outdoor Gun & Pawn.
"We don't know whether we're going to have jobs," worker Shelby Mixon told the Tampa Bay Times. "But if we're getting paid with money that's dishonest money, I don't want it."
The investigation was conducted by the FBI, the FCC's Office of Inspector General and IRS-Criminal Investigation, with assistance from the U.S. Marshals Service.
FCC Chairman Tom Wheeler praised the efforts, which followed a series of 2012 reforms aimed at keeping the program helpful but honest.
"Lifeline helps ensure that all Americans can afford phone service, providing connections to jobs, family and 9-1-1," Wheeler said Thursday in response to the indictment. "But we will not tolerate abuse of this program, and are gratified to see the results of our hard work to battle fraud."
Nationally, the $1.8 billion Lifeline Program subsidized phone service last year for 14.5 million low-income customers. As of June, 918,245 Floridians participated, the PSC reports.
Florida customers are eligible if they are already enrolled in income-based programs such as Medicaid, food assistance or public housing, or if household income falls below 150 percent of federal poverty guidelines.
Staff writer Patty Ryan can be reached at firstname.lastname@example.org or (813) 226-3382.
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To apply online for discounted phone service, go to http://www.psc.state.fl.us and look for the link that says Lifeline Assistance.