Verizon reaches $93.5 million settlement with government over service overcharges

Verizon Communications (NYSE: VZ) is paying $93.5 million to settle a "whistleblower" lawsuit that alleges the telco overcharged the U.S. government on voice and data service contracts.

According to the U.S. Justice Department, Verizon's MCI Communications unit was cited for invoicing the General Administration (GSA) for a number of taxes and surcharges that the DOJ says were in violation of contracts or regulations.

Until the government announced today that it joined the case and reached a settlement with Verizon, the "qui tam" lawsuit was not publicly known.

During the period from 2004 to 2010, the government said Verizon allegedly billed the government for a number of surcharges including property tax surcharges, carrier cost recovery charges, state telecommunications relay service surcharges and public utility commission fee surcharges.

Colette Matzzie, a Washington, D.C. attorney with Phillips & Cohen LLP, which represents the whistlelower, said "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.  

Filed by Stephen Shea, a "whistleblower" in 2007, the government claims that the questionable billing began in 1999 under a contract the former MCI had with the GSA to provide local and long-distance voice and data services. After Verizon completed its acquisition of MCI and assumed the responsibility of the GSA contract, the government claims they continued to be billed the same way MCI had done and that it gradually increased the surcharge rates over the past five years.

"This settlement concludes efforts by both parties to resolve this dispute amicably, without further litigation," said Verizon spokesman Peter Lucht in a Washington Post article.

For more:
- Washington Post has this article
- see this release

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