WASHINGTON, D.C. – Attorney General Karl A. Racine today filed a lawsuit against AT&T Mobility National Accounts LLC (AT&T) over its failure to comply with a long-term contract for cell phone and internet services, which resulted in millions of dollars of overcharges to the District. In the lawsuit, the Office of the Attorney General (OAG) alleges AT&T knowingly submitted faulty invoices that did not comply with the contract, which required AT&T to provide the cheapest cell phone and data services available. The company was also required to help the District save money by suggesting alternative lower-priced plans based on data usage and to use a standardized base plan for all District agencies. Instead, AT&T knowingly invoiced the District for features, add-ons, and other services it did not need, causing millions in improper charges that were paid for with taxpayer funds. OAG is seeking damages and penalties from AT&T for violating D.C. law and the District’s False Claims Act (FCA) and for overcharging the District between 2012 and 2018.
“AT&T promised to provide the District with cost-effective services that would save taxpayers millions of dollars. Our investigation revealed that AT&T breached its promise and unlawfully overcharged the District for telecommunications services,” said AG Racine. “Contractors that break their promises and defraud the District of money that could be used on behalf District residents will be held accountable.”
AT&T is an American telecommunications company incorporated in Delaware, with offices in Atlanta, Georgia. In August 2012, the District entered into a contract with AT&T in return for wireless voice and broadband services, accessories, and equipment. The key objective of the contract, which was signed by the District as well as government entities from other states, was to ensure the group’s prices were lower than what they could have received had they entered into a contract with the company independently.
To keep prices low, the contract required that AT&T provide three cost-savings mechanisms to the District and other government entities: (1) AT&T would provide services to the District at the lowest cost available; (2) AT&T would provide quarterly reports that would suggest ways the District could save money by, for example, shifting users who were exceeding limits of their plans and incurring overages to more cost-effective plans or by shifting users who were not using the full extent of their plans to cheaper plans; and (3) AT&T would set a standardized base plan for all District government agencies, so that there was a consistent billing structure across District government.
This case was originally brought under the FCA by Jeffery Smith, a contractor who previously owned a rate optimization firm and helped prepare rate optimization reports—the quarterly submissions that would have helped ensure that a buyer was purchasing the most cost-effective available plans—for some of AT&T’s customers but was not utilized for the District’s contract. After Mr. Smith filed his case, OAG independently investigated the matter and intervened in the case with its own complaint under the FCA, which makes it illegal to defraud the District. OAG’s complaint alleges AT&T violated the FCA by failing to:
- Produce quarterly price optimization reports: Price optimization reports—which analyze all available services and all users’ activities to determine how an entity could save money—are a common practice in the telecommunications industry and are known to save customers 20-30% on wireless services. AT&T agreed to provide these reports on a quarterly basis but failed to do so. Instead, AT&T provided an array of other reports using similar and misleading phrases like “plan optimization” and “rate plan analysis.” This made it appear as though it was complying with the contract, even though the reports did not include the data or information necessary to be a price optimization report.
- Offer standardized base rate plans: District entities receiving AT&T’s services were charged widely varying amounts for rate plans, data, and add-ons, even though AT&T agreed to provide standardized plans. Because AT&T did not standardize its plans, the District was forced to identify overcharges on each invoice or user line and demand credit on an ad hoc basis. Some users were set up without a data plan, resulting in thousands of dollars of overages when data was used on their device.
- Provide the District with the lowest cost available for these services: AT&T knew that failing to provide both quarterly price optimization reports and the standardized plans under the contract would violate its agreement to provide services at the lowest cost available and result in overbilling to the District, yet it continued this unlawful practice.
In this lawsuit, OAG is seeking to recover treble damages—three times the money that the District was overcharged —and penalties for each false claim submitted to deter fraud against the government, as well as interest and costs the District incurred by bringing this case.
A copy of the complaint is available at: https://oag.dc.gov/sites/default/files/2021-02/AT-T-Complaint.pdf
Fighting Public Corruption
OAG can bring court actions against those who violate the False Claims Act by making false claims to the District government for the purpose of improperly obtaining or retaining government funds. Examples of False Claims Act violators include contractors and grantees who seek to have the District pay for work that was not fully or properly performed.
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