Sprint settles overbilling complaint for $5.5 million

Sprint Corp. and the Justice Department have settled a whistleblower lawsuit that alleged the company knowingly overcharged the government under the FTS2001 long-distance contract.

Under the terms of the settlement, announced June 19, Sprint agreed to pay $5.2 million to the government and not to bill another $339,264 in suspended-billing charges.

Sprint spokesman Steve Lunceford said the company did not admit wrongdoing in the settlement. "This basically was a billing dispute," Lunceford said. "We're happy to put the issue behind us."

The allegations arose from a lawsuit filed by telecommunications consultant John Russo, under the whistleblower provisions of the False Claims Act.

According to his attorney, Don Warren, with the San Diego firm Warren Benson Law Group, Russo was working for a school district in early 2002 and sent out a request for bid to several long-distance companies, including Sprint.

"When the bid came back, he saw that Sprint was overcharging the [presubscribed interexchange carrier] charge," Warren said. "In investigating this and communicating with Sprint personnel, he was told that Sprint charged that to everyone, and [the company] refused to decrease the charge."

Pre-subscribed interexchange carrier charges are fees long-distance companies pay to local carriers to recover part of the costs of facilities that link telephone customers to the network.

Russo researched the public contracts held by Sprint, and realized the company held one of the federal government's long-distance contracts, Warren said. This led him to file the lawsuit under the False Claims Act in April 2002.

Lisa Palombo, assistant U.S. attorney in Los Angeles, said lawsuits such as this are sealed when filed, allowing the government time to investigate the allegations and determine if it wants to take over the lawsuit, as happened in this case.

Under the terms of the False Claims Act, Russo will receive about 17 percent of the Sprint settlement, or $944,562. Sprint also agreed to pay $30,000 in attorney's fees to his lawyers.

The civil investigation and settlement were jointly handled by the Office of the United States Attorney for the Central District of California and the Civil Division of the Justice Department, with assistance from the General Services Administration.

Sprint was awarded the FTS2001 contract by the GSA in December 1999, followed a month later by an award to WorldCom Inc. The contract has a potential life of eight years, including options, and a ceiling of $8 billion.