AT&T files lawsuit against MCI, alleging fraud in call routing
Posted on: Tuesday, 2 September 2003, 06:00 CDT
ALEXANDRIA, Va. (AP) -- AT&T Corp. filed a lawsuit against MCI on Tuesday, accusing the company of routing long-distance calls through Canada to force AT&T to pay costly fees that should have been paid by MCI.
The civil fraud and racketeering lawsuit was filed in U.S. District Court in Virginia, and seeks damages of at least $10 million and an injunction to prevent MCI from improperly rerouting calls.
The charges are being investigated in a federal criminal probe. Prosecutors are also investigating charges by Verizon Communications and SBC Communications that MCI has disguised its calls as local traffic to avoid paying the fees that local telephone companies get for providing the connection between a long-distance network and a person's home.
The AT&T lawsuit contains new allegations that MCI sent calls through Canada even when the final destination was a local phone network in Phoenix owned by MCI. By doing so, MCI forced AT&T to pay fees that MCI ``created out of thin air,'' the lawsuit alleges.
MCI has rejected AT&T's earlier charges and defended its call-routing strategies as proper. The company said in a statement Tuesday that the lawsuit ``is nothing more than AT&T trying to make headlines from something that is at best a commercial dispute that started weeks ago.''
MCI, formerly known as WorldCom, is trying to emerge from bankruptcy a little more than a year after collapsing in an $11 billion accounting scandal. The new controversy over call routing has threatened to delay that effort.
The company says its accusers are merely trying to sabotage its bankruptcy reorganization to avoid having to compete with a lean, rejuvenated competitor.
Typically, when an MCI subscriber makes a long-distance call, MCI must pay an access fee to the local company that owns the final connection to the dialed phone number. In many rural locations, where running a local phone system is less profitable, the access fee charged to long-distance companies can be particularly high.
Since AT&T has a contract with Bell Canada in which most of the Canadian company's U.S.-bound calls are routed onto AT&T's network, the local access fees for those completing those calls are paid by AT&T.
The lawsuit claims MCI conspired with a small carrier to route long-distance calls that originated in the United States through Canada, forcing AT&T to pay access fees that would have been billed to MCI if they had remained on MCI's vast U.S. network. The alleged conspiracy began on or before July 2001 and has continued through the present, according to the lawsuit.
According to the lawsuit, MCI's alleged scheme became apparent when it won a long-distance account from Wells Fargo bank. The day after MCI won the contract from AT&T, a substantial amount of Wells Fargo traffic was routed through Canada, AT&T said.
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