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AT&T to Pay $3.5 Million to Resolve Claims in FCC Program

Nov. 7 (Bloomberg) -- AT&T Inc. agreed to pay $3.5 million in addition to $18.25 million it already paid to resolve allegations it overbilled the U.S. for a system for the deaf the company knew was used for fraudulent calls from other countries.

The settlement announced today by the U.S. Justice Department involves a Federal Communications Commission program that reimburses telecommunications companies that provide phone service for people who are hearing or speech impaired.

AT&T paid an initial $18.25 million in a May 7 agreement with the FCC, the government said. Today, the Justice Department said in a statement that Dallas-based AT&T agreed to pay another $3.5 million to resolve civil allegations under the federal False Claims Act.

Marty Richter, a spokesman for AT&T, said in an e-mailed message that although the company denies the allegations, it decided the “most productive course” was to settle the suit. Richter said the case involved “an exceptionally small line of business that we no longer offer.”

The government joined a private citizen’s whistle-blower lawsuit against the company in federal court in Pittsburgh in March 2012. The Justice Department alleged that from December 2009 through December 2011, as many as 80 percent of the IP Relay service calls for which AT&T claimed reimbursement were ineligible because they weren’t placed in the U.S. or weren’t made by hearing- or speech-impaired people.

The government said a large share of the calls came from Nigeria or other countries and that the callers used the program for credit card fraud or other fraudulent actions.

Whistle-Blower Suit

The whistle-blower suit was filed by Constance Lyttle, who will receive $525,000 of the settlement, the Justice Department said.

The case stems from services mandated under the Americans with Disabilities Act that require carriers to provide voice telephone services for hearing- or speech-impaired callers. Carriers use intermediaries to relay real-time conversations.

The service is free to hearing-impaired callers and carriers can seek reimbursement for calls originating in the U.S. at $1.30 a minute through a fund administered by the FCC.

Since its inception in 2002, the anonymity provided by the IP Relay program was abused by criminals outside the U.S., according to the lawsuit. AT&T in 2004, after getting complaints from merchants, determined the Internet Protocol addresses of 10 of the top 12 users of the service were abroad, primarily in Lagos, Nigeria, the government said.

Certified Callers

In late 2008, the FCC required that providers certify that callers were eligible for the program by verifying the user’s name and mailing address.

After AT&T managers became concerned that use of the program would decrease, the company began using an Internet database to confirm users’ addresses, according to the lawsuit. By the end of October 2009, AT&T managers were allegedly aware that credit card scams were being conducted by new users.

The case is Lyttle v. AT&T Communications of Pennsylvania, 10-cv-01376, U.S. District Court, Western District of Pennsylvania (Pittsburgh).

To contact the reporters on this story: Laurie Asseo in Washington at lasseo1@bloomberg.net; Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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