AT&T (NYSE: T) decided to drop its $1.15 million suit against Salem, Mass. business owner Michael Smith, a victim of a phone hacking scheme.
The telco dropped their suit against Smith following a report in local newspaper The Salem News, which broke out into the national mainstream when the Associated Press (AP) picked up on the story.
"We are no longer pursuing these claims, though we are entitled by law to collect the amounts owed," said Kate MacKinnon, a spokeswoman for AT&T, in a statement.
But AT&T wants something in return from Smith: they want him to drop his countersuit accusing the telco of abusing the legal process and violating state consumer protection laws.
In 2009, Smith said that someone hacked into his PBX and made $900,000 in calls to Somalia. Later, AT&T sued Smith for $1.15 million to recoup the cost of the calls and interest.
What's interesting is that Smith's voice service provider is actually Verizon (NYSE: VZ), not AT&T. When Verizon noticed $260,000 worth of international calls being made in just one weekend, the service provider turned off his company's ability to make international calls. Later, Verizon decided to write off the $260,000 charges.
To carry out their scheme, the hackers used AT&T as a "dial around" long-distance service.
While AT&T acknowledged the calls were fraudulent, they argued that Smith should have put in more safeguards to protect his phone system and that they can collect charges from the owner of the phone line used to make calls.
Phone hacking is not just relegated to small business owners alone.
Rupert Murdoch's News of the World came under fire last year for illegally accessing voicemail messages of two sets of crime victims: an abducted 13-year old girl found murdered and relatives of people killed in London's July 7, 2005 bombings.
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