Only On 2: Free 'Obama Phones' A Little Too Easy To Get

LOS ANGELES (CBSLA.com) — They're lined up outside welfare offices, on street corners and in supermarkets: people hawking free cellphones for those in need.

CBS2 Investigative Reporter David Goldstein says it's called the California Lifeline Program, but it's more commonly known by another name.

"Is that what they call the 'Obama phones?' " asked one customer.

The program exploded under President Barack Obama: 14 million American have the free phones, costing $2.2 billion in subsidies nationwide in 2013. And it's all paid for by taxpayers.

There's a Lifeline surcharge on everyone's cellphone bill, and just in California the numbers have tripled: 30,000 new subscribers in August, 90,000 just last month.

Officially, you need proof of government assistance or low income in order to qualify for the program.

But our undercover producer hit the streets telling people she didn't have anything — no Medi-Cal or EBT card — and found plenty of salespeople, many of whom work on commission, willing to offer advice on how to bend the rules.

One salesman for Budget Mobile stationed outside a South L.A. welfare office was one of those people.

"Do you have any friends or family that might have EBT or some sort of social service?" he asked our producer. "What you could do is ask your friend to sign up for a free phone and when it comes in, they can let you have it."

But once someone receives a phone, they're not supposed to do that.

In a statement (PDF), Budget Mobile spokeswoman Robin Enkey said the company is in "strict compliance with all applicable federal and state regulations."

Outside one welfare office on Grand Avenue, two salespeople for Assurance Wireless said our producer could use someone else's card, which is against the rules.

But it was outside another welfare office on 108th and Central that Erica, also with Assurance Wireless, went the furthest.

"You don't need an ID or a Social Security number, none of that," she said. "I would make up the Social, the last four, I would make up those four numbers for you.

"If you have a friend or something that already has their EBT, I'll take a picture of their card so that you can get the phone," Erica offered.

"But would it be in my name?" our producer asked.

"Yeah, I can put it in your name," Erica replied.

We never went through with any of the transactions and later went to talk with Erica.

"How's the Obama-phone business, good?" Goldstein asked. "You said you would give her a phone, you'd make up a Social Security number, you'd let her use someone else's ID."

She denied the allegation.

"No, I did not tell her that," said Erica. "I never told her I'd let her use somebody else's ID or make up a Social."

Even after playing the video footage, she still denied it.

"No, no, I didn't tell here that she could use somebody else's EBT card," she said.

In a statement, a company spokesperson said Assurance Wireless is investigating the conduct described in this report.

"State and federal regulations require Lifeline applicants to present valid proof of program eligibility and to certify to the accuracy of information provided on the application," the statement read. "Assurance Wireless continuously audits the conduct of its sales agents to ensure that proper procedures are being followed and that only valid applications are collected."

Kris Vosburgh of the Howard Jarvis Taxpayers Association says all of us paying for the program are being ripped off.

"There appears to be very little oversight on a multibillion-dollar program," said Vosburgh. "We're just getting a lot of scammers who are applying and they're not being filtered out by the system. There just isn't a checks and balances overseeing this system."

But the FCC, which regulates the program nationally, says it's been cracking down. Last year, it canceled 2 million subscribers because of fraud and abuse.

In California, state regulators say they do even more fraud detection than the Feds.

But on the streets, we still found those who are bending the rules.

"Is that the way the process is supposed to work?" asked Goldstein.

"Well, I don't feel like answering any more questions," Erica of Assurance Wireless replied.

UPDATE – Assurance Wireless has responded to our investigative report with the following statement:

"Assurance Wireless has been keeping Americans connected to family, health services and job opportunities since 2009. Assurance Wireless representatives are trained to assist applicants in completing the Lifeline application in accordance with federal and state regulations. Assurance Wireless continuously audits the conduct of its sales agents to ensure that proper procedures are being followed and that only valid applications are collected. The sales agents whose conduct was captured in the report have been terminated. All applications collected by these individuals will be reviewed to ensure that the information provided by the applicants is valid."