AT&T Sues St. Louis Park, Minn.-Based Telecommunications Firm
Sep. 3–Already under the shadow of a federal criminal investigation, St. Louis Park-based telecommunications company Onvoy was accused Tuesday by long distance giant AT&T of fraud and conspiracy in a civil racketeering lawsuit aimed at it and controversial long-distance carrier MCI.
AT&T filed the lawsuit less than a week before MCI is scheduled to appear in federal court on Monday to seek approval for its plan to emerge from bankruptcy this year. MCI had filed for bankruptcy protection after admitting to nearly $11 billion in accounting fraud. The lawsuit’s charges for the most part mirror accusations under investigation by the U.S. Attorney for the Southern District of New York. The investigation was touched off this summer by a former Onvoy engineer who told Verizon Communications that Onvoy was improperly routing MCI calls through Canada.
MCI’s rivals say MCI used Onvoy as an intermediary to route some of MCI’s more-expensive long-distance traffic through Canada so it could trick long-distance companies like AT&T into paying hefty fees to connect the calls with local phone companies on the other end.
Onvoy and MCI released statements Tuesday denying wrongdoing and said the lawsuit was nothing more than a last-minute attempt to derail MCI’s bankruptcy proceedings.
“We anticipated this type of maneuver out of AT&T this week prior to MCI’s bankruptcy hearings getting underway,” Onvoy CEO Janice Aune’s statement said.
“This is nothing more than AT&T trying to make headlines from something that is at best a commercial dispute that started weeks ago,” MCI spokeswoman Claire Hassett said in her company’s statement.
But AT&T general counsel Jim Cicconi said the fraud was ongoing and deliberate and that AT&T filed the lawsuit to recover money it lost to the alleged scheme concocted by MCI and Onvoy.
The company has not tallied the bill, Cicconi said, but its lawsuit claims damages of at least $10 million, and the company could collect triple that amount plus attorney’s fees if it wins.
“We think we’re seeing only the tip of the iceberg,” Cicconi said.
According to AT&T, MCI and Onvoy deliberately laundered MCI’s domestic long-distance calls through Canada using a service Onvoy called its “Canadian Gateway Project.”
Onvoy would accept MCI domestic long-distance calls and send them into Canada where they would be handled by Canadian phone companies, and then rerouted back to the United States.
AT&T would pick up the calls as international long-distance traffic and deliver them to local telephone companies, which in turn would send them to the recipient.
Many of the calls ended in rural areas served by small telephone companies that charge long-distance companies high rates to complete phone calls. Long-distance companies do not have their own local telephone lines into homes and businesses, so AT&T would get stuck paying the high rates on what are called “termination fees,” it said.
In a new allegation Tuesday, AT&T said it also discovered that some MCI long-distance calls routed through Canada by Onvoy would end up with MCI on the other end as the local phone company. In other words, AT&T was paying MCI a termination fee for carrying an MCI long-distance call that MCI could have connected itself without leaving its own network, Cicconi said.
Onvoy and MCI have defended Onvoy’s Canada Gateway Project as one of the myriad of “least-cost routing” methods common in telecommunications to connect calls as cheaply as possible. MCI said its internal investigation uncovered no wrongdoing in its dealings with Onvoy and an Onvoy spokeswoman called the charge “meritless.”
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