Verizon, AT&T to Pay $116 Million for ‘Shocking’ Conduct in Whistleblower Case

Verizon and AT&T have agreed to pay a combined $116 million to settle a whistleblower lawsuit alleging overcharging in California.

The suit claimed they overcharged California government customers for wireless services. This is the second-largest California False Claims Act settlement in the state’s history outside of the health care industry.

Verizon will pay $68 million and AT&T will pay $48 million. The suit claims that for more than a decade the carriers knowingly ignored two cost-saving requirements included in multibillion-dollar contracts.

The contracts offered wireless services to state and local government users in California and other states.

‘Shocking’ Conduct

OnTheGo Wireless sued the carriers under the false claims act. It allows a whistleblower to sue on behalf of California government entities. More than three dozen California government entities joined the lawsuit.

Constantine Cannon filed the whistleblower lawsuit.

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

The contracts are among the largest public-sector telecommunications contracts in the country. They mandated the carriers charge the government entities at the “lowest cost available.”

They also required the carrier identify “optimized” rate plans that best suited actual usage patterns that drive cost.

The carriers cheated California government entities out of hundreds of millions in savings, the suit alleged.

‘Meritless’ Claims

Verizon spokesman Richard Young said the lawsuits involved two Verizon contracts to provide wireless services to government agencies in California and Nevada.

Verizon’s Richard Young

“After its own independent investigation, the California Attorney General decided to not engage in the matter,” he said. “But an outside party took advantage of the false claims act and sued on the states’ behalf. Verizon settled these meritless claims to avoid a protracted legal battle that would only have benefitted the plaintiff and his attorneys.”

We couldn’t reach AT&T for comment.

The largest users among the nearly 300 state and local entities recovering money 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.

Jeffrey Smith formed OnTheGo Wireless

“I’m immensely gratified to have helped California taxpayers, and that the government will have these funds at this difficult time,” he said. “This has been a long and difficult road. The carriers fought hard.”

OnTheGo will receive about 40% of the settlement as a whistleblower reward under the false claims act.

Sprint and T-Mobile previously reached settlements in the California case for $9.6 million combined. In total, the four major telecom providers will pay $125.8 million to settle allegations under the false claims act.