Verizon, AT&T Will Pay $127m For Overcharging Government Entities

Last week, Verizon Wireless and AT&T Mobility agreed to pay a combined $127 million to settle  lawsuits from 2012 alleging that their overcharged California and Nevada government entities for their wireless services; the settlement was approved last Thursday by the California State Sacramento County Superior Court.

Verizon will pay $76 million and AT&T will pay $51 million to settle claims from the 2012 whistleblower suits that claimed that for more than a decade Verizon and AT&T did not optimize rate plans to the lowest cost option as required in their multibillion-dollar contracts with the governments to provide wireless services to state and local government users in California, Nevada, and other states. Specifically, the firm Constantine Canon, representing the whistleblower and government entities, said the telecom providers were supposed to charge the government entities “at the ‘lowest cost available’ and that the carrier identify ‘optimized’ rate plans that best suited actual usage patterns that drive costs.” Furthermore, the lawsuit alleged that since the providers offer numerous rate-plans at a time and can often change the plans’ features or costs, the providers had the burden to identify and provide the optimized plan for each government entity. Additionally, since usage can vary from month to month, and the plans can change, the cost effectiveness of a plan can vary, as a result, the contract required the providers to provide quarterly reports for the optimized rate plans.

The lawsuit averred that the providers’ failure to uphold these contractual obligations costs the government entities hundreds of millions of dollars that could have been saved.

The whistleblower, OnTheGo Wireless, LLC, was formed by Jeffrey Smith, described as a “pioneer in wireless optimization.” Through his company’s software, which compares and analyzes rate plans offered by carriers, Smith found that the providers “failed to provide contractually-required cost-saving opportunities to their government customers.” OnTheGo filed the complaints against the telecom providers under the California False Claims Act and Nevada False Claims Act, both of which allow whistleblowers to sue on behalf of government entities in their state and share in the recovery. According to law firms Constantine Canon and Susman Godfrey, who are representing the whistleblower and government entities, this settlement is the second largest California False Claims Act award in California’s history that is not in the healthcare industry. As the whistleblower, OnTheGo will receive approximately 40% of the settlements as a reward under the Acts.

“I’m immensely gratified to have helped taxpayers, and that the government will have these funds at this difficult time,” Smith said. “This has been a long and difficult road; the carriers fought hard.  But with the help of my lawyers, and the government agencies that jumped in, we brought home a terrific victory for state and local governments.”

Approximately 300 state and local entities will recover money from the settlements, some of the largest entities include the State of California, and intervenors, such as the California State University system, the University of California system, Los Angeles County, Orange County, and Sacramento and Riverside city and county governments. Accordingly, Verizon will pay $68 million to California entities and $8 million to Nevada entities, while AT&T will pay $48 million to California entities and $3 million to Nevada entities.

“The conduct alleged by the whistleblower was shocking: that our country’s largest wireless carriers made promises to government agencies to get their business but failed to provide the same cost-saving service many Fortune 500 companies receive,” Wayne T. Lamprey of Constantine Cannon, who filed the lawsuit and was lead counsel, said. “It may be a rounding error to Verizon and AT&T, but this is real money to California and Nevada’s schools, local governments and state agencies, who spent years scraping through their budgets to pay what we now know were over-inflated bills.”

Previously, Sprint and T-Mobile reached settlements for a total of $11.7 million. In sum, all of the telecom providers will pay a total of $138.7 million to settle the lawsuits, although the defendants denied their liability. The Associated Press reported that both Verizon and AT&T denied wrongdoing, but settled to avoid costly litigation. Verizon and AT&T will also pay for attorneys’ fees, an additional $23.45 million and $13 million respectively.