The secret behind me and my 'Obamaphones'

This is a rush transcript from "On the Record," August 1, 2013. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: How easy is it to get a free cell phone from the government? The free phones are supposed to go to people who are very poor. But one reporter set out to see just how simple it is to abuse the Lifeline program and stick you -- yes, you! -- with those phone bills to pay for it.

The National Review's Jillian Melchior is here to tell us what she found. Nice to see you, Jillian.


VAN SUSTEREN: All right, so tell me, were you able to get a free phone?

MELCHIOR: I was not only able to get one, I was able to get three. And I'm not eligible for any of them.

VAN SUSTEREN: How were you able to get them so easily?

MELCHIOR: Well, I think pretty much anywhere that you can get food stamps, they have vendors out on the street who are approaching you and saying, Do you have a free phone yet? And so I'd say no, or when I did have one, I said yes. And they would ask you whether you were on welfare of any kind. I said, No, but I'd sure like to be. And that got me signed up. They pull out their electronic tablet, take down my home address and send it off to me just like that. I was able to get three of the eight applications I put in.

VAN SUSTEREN: Were you deceitful in any way in terms of answering the questions?

MELCHIOR: I wasn't. I told the whole truth. I mean, when I got one phone in the mail, FCC rules are you can only have one phone per household. I got one phone, and I told them about it. And I had vendors telling me, Don't worry. It's OK. You can have one phone from every single vendor participating in the program. And it turns out that's just not true.

VAN SUSTEREN: Where did you go for these? I mean, what are these hotspots where we can get all these free phones, apparently, and we don't have to be eligible?

MELCHIOR: If you go to the welfare offices in New York City. I went to the food stamp offices. And they have vendors outside. They're usually in twos, from the two companies, Safelink and Assurance.


VAN SUSTEREN: I understand you have them. So can we see what they look like?

MELCHIOR: I do. This is my Safelink phone, still active. And then these two here are my Assurance phones and...

VAN SUSTEREN: What does that mean?

MELCHIOR: Those are -- that's a different provider.


MELCHIOR: Those two are from Assurance, and I deactivated them today because I didn't want to take advantage of the taxpayer.

VAN SUSTEREN: All right. Now, when I get my phone bill, I'm actually taxed to pay your three phones, right?

MELCHIOR: You are. You'll see it at the bottom of your phone bill. And it's the Universal Service Fund.

VAN SUSTEREN: That's all it -- what does it say on the bill, just Universal Service Fund?

MELCHIOR: Yes. I think it's usually about $2.50. And that goes to fund it. So it's really taxpayers that are paying for this program. And since they included cell phones in it in 2008, costs have soared. It's up to, like, $2.1 billion a year. And that's pretty incredible considering as early as 2008, it was only $822 million.

VAN SUSTEREN: Well, it's a program that started back in 1984 or '85, I think. And now, as of June 13, it's over 13.4 million of those phones.

MELCHIOR: Yes, it's an incredible amount. And I think what you've got here is cell phone companies that have every incentive to hand them out. They're literally getting free money from the federal government, which means free money from the taxpayer.

And they're also -- they're in the business of cell phones. They're not in the business of checking whether or not I'm on welfare. And so to the extent that the government's not supposed to be in the cell phone business, cell phone companies aren't in the welfare business. But once you confuse them, you see a lot of people signing up, and many of them shouldn't have them.

VAN SUSTEREN: Did you know before you started down this investigative project -- did you know what that $2.50 charge was on your bill at all?

MELCHIOR: I didn't. And I'm glad I know now. It kind of makes me mad, but I still think it's crazy that I was able to get them.

VAN SUSTEREN: And the estimate is how much in fraud in a year?

MELCHIOR: I'm not sure on fraud. I know there was an audit a while ago that said about 41 percent hadn't been verified as eligible and hadn't confirmed (ph). But I don't know what that adds up to in numbers.

VAN SUSTEREN: Jillian, thank you.