AT&T, Verizon pay $116M in fraud settlement case in California

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The carriers claimed they were never required to provide the lowest-cost wireless service to the California agencies. (Pixabay)

Verizon and AT&T will pay a combined $116 million to the state of California as settlement in a whistleblower’s case that was brought in 2012. The case alleged that Verizon, AT&T, T-Mobile and Sprint did not abide by their contracts with California agencies in which they were supposed to inform government customers which rate plans would result in the lowest possible cost.

According to the plaintiffs, the contracts mandated that government entities be charged at the "lowest cost available" and that the carriers identify optimized rate plans that best suited actual usage patterns over time. The carriers’ position was that they were not required to do so.

T-Mobile and Sprint previously settled in the case, paying a combined $9.6 million. Last week, Verizon agreed to settle for $68 million, and AT&T agreed to pay $48 million.

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The whistleblower entity that brought the case was OnTheGo Wireless, which provides rate plan optimization services to government agencies and enterprises.

OnTheGo’s software compares rate plans offered by carriers. The company’s principle Jeffrey Smith concluded that the carriers failed to provide contractually required cost-saving opportunities to their government customers. OnTheGo sued the carriers under the California False Claims Act, and 30 California government entities joined the lawsuit in the Sacramento County Superior Court.

Incredibly, as a result of the settlement, the whistleblower will receive more than $40 million of the $116 million proceeds from AT&T and Verizon.

Anne Hartman, an attorney with Constantine Cannon, a law firm that represented Smith and his company OnTheGo, said, “The whistleblower can be a third party who has information about fraud. The False Claims Act provides a way where you know you’re going to get attention. The Attorney General will investigate the claims.”

In terms of Smith’s huge payout, Hartman said he paid the price of filing the lawsuit and paying legal fees over an extended period of time.

RELATED: Verizon, AT&T, T-Mobile and Sprint accused of overcharging governmental customers in Calif.

What happened with the contracts?

The carriers claimed they were never required to provide the lowest-cost wireless service to the California agencies, and they never did make an effort to do so. Hartman said that as far as she knows, new contracts between the carriers and the agencies do not include any language requiring the carriers to optimize costs. 

She said it’s disheartening that there isn’t more choice of wireless providers for California government agencies. “AT&T and Verizon still have contracts with the agencies of California. If you don’t want to buy from Verizon [for example], who are you going to buy from? I think it’s a shame.”

Among the nearly 300 state and local entities recovering money from the settlement are the State of California, the California State University system, the University of California system, Los Angeles County, and Sacramento, San Diego, San Francisco, and Riverside city and county governments.

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