Last week a video of a President Barack Obama supporter in Ohio claiming to have received a free phone from the president—'[Obama] gave us a phone!"—went viral, prompting media outlets to investigate.
Since 1985 the Federal Communications Commission (FCC) has operated a program called Lifeline, originally designed to provide free landline phone service for low-income individuals. The government subsidizes telecommunications firms providing the service, and those firms also pass on costs to customers via the 'Universal Service Charge" on their phone bills.
The program expanded to include cell phones in 2008. That change has rapidly increased the cost to the federal government—$1.6 billion in 2011, up from $772 million in 2008. The number of Lifeline beneficiaries rose from 7.1 million to 12.5 million during the same period; cell phones account for roughly half of that 12.5 million.
One of the major providers of the free cell phones—3.8 million subscribers as of late 2011—is Miami-based TracFone Wireless, a company whose president and CEO, Frederick 'F.J." Pollak, has donated at least $156,500 to Democratic candidates and committees this cycle, including at least $50,000 to the Obama campaign.
Pollak’s wife, Abigail, is a campaign bundler for Obama who has raised more than $632,000 for the president this cycle, and more than $1.5 million since 2007. She has personally contributed more than $200,000 to Democratic candidates and committees since 2008.
The Pollaks hosted Obama at their Miami Beach home in June for a $40,000-per-plate fundraising dinner, and hosted a similar event with Michelle Obama in July 2008. The couple personally donated a combined $66,200 to Obama’s reelection effort that year.
Visitor logs indicate that Frederick and Abigail Pollak have visited the White House seven times. In 2009, the president appointed Abigail to serve on the 'Commission to Study the Potential Creation of a National Museum of the American Latino."
TracFone, a direct financial beneficiary of the Lifeline program, receives $10 a month for each subscriber in the form of federal subsidies. The company can make an additional profit selling extra minutes to Lifeline subscribers who exceed their monthly allowance of 250 prepaid minutes.
TracFone and other wireless providers claim that revenue from selling additional minutes to Lifeline customers is low, but decline to publicly release such figures.
The program's rapidly increasing costs have attracted the attention of Republicans and Democrats in Congress, and have prompted calls for reform. Sen. Claire McCaskill (D., Mo.), for example, found that the program was 'ripe for fraud." In some cases, McCaskill noted in a December 2011 press release, the government was issuing multiple free phones to the same individuals.
'I remain troubled by the expansive potential for the program to be abused, especially since Americans contribute to the program through their monthly phone bills," McCaskill, who is up for reelection, wrote in a formal letter to the FCC. 'The current requirements to determine eligibility often do not require customer documentation for participation in Lifeline, which may result in individuals receiving phones who should not be."
Rep. Tim Griffin (R., Ark.) has introduced legislation to restore the program to its originally intended purpose—providing landlines for use in emergencies—and stop the federal government from issuing free cell phones. Griffin told the Daily Caller he had heard reports of individuals receiving dozens of phones, some of which were of the expensive smartphone variety.
The FCC in response to such pressure announced in February 2012 to reform the program and 'reduce the potential for fraud while cutting red tape for consumers and providers."
TracFone, which did not return a request for comment, is the U.S. affiliate of America Movil, one of the largest phone service providers in Latin America.
America Movil is one of many business ventures controlled by Mexican billionaire Carlos Slim, currently the world’s richest man, according to Forbes. Slim’s stake in the firm accounts for more than half of his $70 billion net worth.
Slim—who bailed out the New York Times and is often referred to as 'Mexico’s Mr. Monopoly"—has visited the White House at least twice, according to visitor logs.