AT&T awarded $250K judgment from sham CLECs

AT&T (NYSE: T) has been awarded a $250,000 judgment from three fake CLECs that were created to bill service providers for services they never provided.

Although these CLECs billed AT&T $13 million, the telco only paid a part of that figure before realizing it was roped into a scam. The three service providers -- All American Telephone Co., e-Pinnacle Communications, and ChaseCom -- which had businesses located in Utah and Nevada went defunct in 2010.

These companies were created by Beehive, another company that previously reached a settlement with AT&T.

Although the CLECs had received certifications from state commissions to operate as service providers, they only offered services to a small number of chat line and conferencing providers.

In its ruling, the FCC said that these companies "operated as sham competitive local exchange carriers (CLECs) that were created for the purpose of inflating terminating access revenues, and that they billed AT&T for access services they did not provide under valid tariffs."

The FCC granted AT&T's complaints against the company and ordered the three defendants to pay back the $252,496 they received from AT&T in March 2013.

However, the FCC dismissed AT&T's request for "consequential damages," saying that the telco can seek those damages through a court.

For their own part, the three CLECs said in the FCC proceedings that the "commission lacks jurisdiction over them because the Liability Order [from 2013] found them not to be 'bona fide' CLECs." The companies added that an order to pay back AT&T would violate the Fifth Amendment prohibition against uncompensated takings of private property.

The regulator rejected their claims, citing a federal appeals court ruling that said a similar argument was "flatly wrong."

For more:
- ars technica has this article
- see the FCC ruling (PDF)

Related articles:
AT&T's Stephens: We're encouraged by our 1 Gig progress
AT&T converts nearly 80% of broadband subscribers to its IP platform
AT&T says it needs to invest in FTTP where it makes economic sense
Google Fiber's presence pressures AT&T to adjust 1 Gig pricing plans