One of Alaska's telecom giants has paid $1.56 million to federal authorities to settle a case alleging rampant abuse of a federal phone-bill subsidy for low-income households in the Anchorage area.
The case began two years ago when a local office manager filed a whistleblower suit in federal District Court accusing her employer -- an Anchorage door-to-door sales firm -- and former statewide wireless provider Alaska DigiTel of defrauding the phone subsidy program.
The woman, Natalia Napoleon, originally from the Western Alaska village of Akiachak, could not be reached for comment on Tuesday. Her Lower 48 attorneys did not respond to a request for comment. The firm she worked for, Statewide Sales, is no longer in business.
The case involved phone bill discounts for low-income Alaskans provided to people who were not eligible for the discounts. It's unclear at this point how many customers were involved and how much money the federal government lost due to the fraud.
In January, federal prosecutors decided to use their right to take over Napoleon's case but they dropped the claims Napoleon made against Statewide Sales. Napoleon agreed to dismiss those charges, court records show. Prosecutors reserved their right to file future, related charges against the sales firm.
As the whistleblower, Napoleon is entitled to about $260,000 of the settlement.
General Communication Inc. purchased a non-controlling 80 percent interest in DigiTel in 2006 and bought the rest of the company in 2008. DigiTel's behavior occurred before it became wholly owned by GCI.
Anchorage-based GCI said it paid the $1.56 million civil settlement in late January to avoid a protracted legal battle. The company declined to comment on whether it believes DigiTel broke federal law.
DRIVE TO BOOST SALES
A U.S. Department of Justice spokesman in Washington, D.C., said Tuesday that as far as he knows, this is the first case of its kind involving the federal phone subsidy program, called Lifeline.
When she filed the case, Napoleon noted "fierce" competition between DigiTel and another company, ACS Wireless, for Lifeline customers in Alaska.
DigiTel was one of many phone providers that remain involved in the Lifeline program. Through the program, providers are reimbursed by the Federal Communications Commission for discounting monthly phone bills for eligible low-income households.
Statewide Sales was brought in by Digitel to help boost sales by going door to door to sign up new customers, according to court filings. It received a sales commission for each Lifeline application it submitted.
Napoleon alleged in her whistleblower suit that Statewide falsified Lifeline applications and encouraged customers to falsify their information as well. She also alleged that Statewide used fraudulent methods to verify customer income, such as Indian blood certification, and that it signed up more than one customer per household, in violation of the federal rules.
"Despite its obligation to ensure consumer eligibility, DigiTel was only concerned that the applications submitted by Statewide were complete and exhibited no concern that the applications were inaccurate or even false," according to her whistleblower complaint, filed confidentially in April 2008.
She alleged that DigiTel never reviewed or audited Statewide's procedures because the sales firm was "central in DigiTel's competition against ACS in gaining a major share of the Alaska cellular telephone market."
Statewide's former owner and lead sales representative, Anchorage businessman Michael Wilson, said Tuesday he did not know anything about Napoleon's whistleblower case or the GCI settlement until he was contacted by a reporter.
Wilson declined to comment about Napoleon's accusations against him and his company. Among her accusations: Wilson had trained employees to submit fraudulent Lifeline applications.
Statewide shut down around the time that its relationship with DigiTel ended, according to Wilson, who says he hasn't been involved with marketing the Lifeline program for several years.
PROGRAM HELPS LOW-INCOME
At last count, 70,826 low-income Alaskans receive discounts on their phone service through the Lifeline program, according to GCI spokesman David Morris.
Qualified Lifeline participants get steeply discounted local phone service. Long-distance service requires extra charges. Eligibility for the program is based on income. The income limits range from $18,360 for a one-person household to $63,531 for an eight-person household.
Door-to-door sales, newspaper ads and fliers at local shops are some of the ways that GCI and phone providers seek out new Lifeline customers, he said.
Morris said that GCI customers will not be billed for the cost of the settlement.
He said all of the alleged wrongdoing at the other two firms happened before GCI had control of DigiTel's daily operations.
"We inherited the problem," he said.
Reach Elizabeth Bluemink at ebluemink@adn.com or 257-4317.
By ELIZABETH BLUEMINK
ebluemink@adn.com