Verizon Communications has agreed to pay more than $93.5 million to the federal government to resolve allegations the company overcharged on voice and data telecommunication services contracts, the Justice Department said today.
A whistleblower suit (PDF) filed in January 2007 was unsealed today in Washington's federal trial court, disclosing the Justice Department's decision to intervene in the litigation. Verizon transmitted the settlement funds to the government in February.
Justice officials said Verizon subsidiary MCI Communications Services Inc. billed the federal government for surcharges that included property taxes and public utility commission fees between April 2004 to September 2010.
DOJ participated in a joint investigation with the General Services Administration’s inspector general’s office.
“A government contract is not a blank check,” U.S. Attorney Ronald Machen Jr. said in a statement today. “Contractors who overbill the government will be aggressively pursued and required to make the taxpayers whole.” (Civil Division trial attorney Arnold Auerhan and Assistant U.S. Attorney Doris Coles-Huff represented the government in the settlement.)
Lawyers for Verizon, including Wiley Rein partners Roderick Thomas and Rand Allen, were not immediately reached for comment this afternoon. Thomas is chairman of the firm’s white-collar defense practice, and Allen leads the firm’s government contracts practice.
Verizon, according to the settlement agreement (PDF), denied it submitted false claims for payment for certain taxes. “This Agreement represents a compromise to avoid continued litigation and associated risks and is neither an admission of liability by Verizon nor a concession by the United States that its claims are not well founded,” the settlement said.
The government and lawyers for the qui tam whistleblower, private telecommunications consultant Stephen Shea and 2Probe LLC are still debating how much he should receive from the settlement proceeds.
A lawyer for Shea, Colette Matzzie of Washington’s Phillips & Cohen, said the dispute has been referred to Magistrate Judge John Facciola of the U.S. District Court for the District of Columbia.
Shea is entitled to a statutory minimum of 15% of the settlement—about $14 million, according to court records. In cases where the Justice Department has intervened, whistleblowers can receive a 15% to 25% cut of the settlement.
“Verizon was not only charging the government for the costs associated with communication services, but it also was pumping up its revenues by charging the government for Verizon’s own property taxes and other costs of doing business,” Matzzie said in a statement. “Under federal law, Verizon was responsible for paying those costs, not the government.”
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