COO Of Lifeline Providers Defends Companies Against Fraud Allegations

Executives of an Oklahoma cell phone company at the center of a nationwide fraud and forgery probe say they're not guilty.

TerraCom and YourTel provide cell phone service for the poor under the federal Lifeline program. Lifeline has been the topic of several 6 Investigates stories, revealing widespread fraud and abuse.

The COO of those companies spoke with us exclusively in an effort to set the record straight.

"We feel like it's time for us to step forward and start telling some of the facts," said Dale Schmick.

Schmick is the Chief Operating Officer of one of the largest government-subsidized cell phone operations in the country: TerraCom and YourTel, based out of Oklahoma City.

Together, the companies provide Lifeline service in 26 states.

7/2/2013 Related Story: 6 Investigates Goes One-On-One With Free Cell Phone Provider

In July, we took you behind the scenes at company headquarters and reported TerraCom had been caught breaking the Lifeline rules, when the feds discovered thousands of customers received multiple government-sponsored cell phones. In fact, the feds fined TerraCom more than a million dollars at one point.

Since then, other news reports revealed more issues, including possible fraud and forgery carried out by a TerraCom vendor in Missouri.

The reports lead to cries for harsh punishment for TerraCom and YourTel.

A chief critic of the Lifeline program, Senator Claire McCaskill of Missouri, sent a letter calling on the Federal Communications Commission to "prosecute those responsible to the fullest extent of the law," "fine the companies the maximum amount possible" and "bar them from further participation in Lifeline."

10/1/2013 Related Story: 6 Investigates: FCC Fines 5 Companies Over Government-Issued Cell Phones

But Schmick said it's not that simple. He said reports that TerraCom opened forged accounts are false.

"There's a claim out there about fraud and forgery by an agent of ours. What hasn't been reported is...of the nine people included in these stories, seven of them were denied applications. So those that were denied applications, they never became TerraCom Lifeline customers," Schmick said.

The other two people in the stories, he said, are Lifeline customers fully vetted and enrolled according to the rules.

Still, the companies did fire their entire sales staff after the stories aired, many of whom distributed phones from tents.

He said that wasn't an admission of guilt, rather it was part of an already-in-progress attempt to improve customer service by opening actual retail stores.

"We're building a relationship with those customers. We're serving their needs better," Schmick said.