AT&T overcharged the District of Columbia government for more than five years and has “agreed to pay $1.5 million for its failure to comply with its long-term contract with the District for cell phone and Internet services,” DC Attorney General Karl Racine announced Monday. The settlement doesn’t recoup the full amount of overcharges alleged by Washington, DC, which says AT&T “overcharg[ed] District taxpayers by millions of dollars.”
“My office filed suit against AT&T to ensure that it fulfilled its contractual obligation to provide the District government with the least expensive cell phone and data services available,” Racine said. “We are pleased that after filing suit, AT&T immediately sought to resolve the case in a manner that results in making the District and its taxpayers whole.”
AT&T did not admit to any wrongdoing in the settlement.
“AT&T concealed its overbilling”
As alleged in the AG’s lawsuit filed in District of Columbia Superior Court in February, “AT&T concealed its overbilling, and the District’s subsequent overpayments, with billing practices rife with errors, unapplied credits, billing overages and reports that did not meet the rate optimization standards of the contract.” AT&T “knowingly failed to provide any of the rate optimization services it agreed to provide” in the contract, the lawsuit said.
In August 2012, AT&T and DC entered into a contract whose “key purpose was to ensure that the District’s and other governmental entities’ plans and prices were the most cost-effective and lowest available,” the settlement announcement said. But AT&T overcharged the district from August 2012 until at least January 1, 2018, according to the AG’s lawsuit.
AT&T “submitt[ed] false invoices that did not comply with contract requirements to provide cost optimization and the most cost-effective telecommunications plans available,” Racine’s announcement said. “Instead, AT&T knowingly invoiced the District for features, add-ons, and other services that failed to comport with this mandate, causing millions in improper charges that were paid with taxpayer funds.” The AG alleged that “AT&T violated the District’s False Claims Act (FCA) through its actions.”
More specifically, AT&T failed to provide quarterly price optimization reports that “analyze all available services and all users’ activities to determine how an entity could save money,” DC said. These reports are common in the telecom industry “and are known to save customers 20-30 percent on wireless services,” DC said. AT&T instead provided various “other reports using similar and misleading phrases like plan optimization’ and “rate plan analysis,'” making it appear as though it was complying with the contract. In reality, “the reports did not include the data or information necessary to evaluate the cost-effectiveness of the contracted services,” DC said.
AT&T also “charged widely varying amounts for rate plans, data, and add-ons” despite agreeing to provide standardized plans. This forced the District “to identify overcharges on each invoice or user line and demand credit on an ad hoc basis,” and “[s]ome users were set up without a data plan, resulting in thousands of dollars of overages when data was used on their device,” the settlement announcement said.
“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,” DC said.
Multistate contract was designed to lower costs
AT&T won the contract after bidding on a request for proposals (RFP) that required the winning vendor to comply with conditions designed to lower costs. Nevada was the lead state for the RFP and awarded the contract to AT&T, while the District of Columbia got services under the same contract via a “Participating Addendum.”
“AT&T failed to establish or provide any set of standard rate plans to the District as a Participating Entity under the 1907 WSCA [Western States Contracting Alliance] Contract until at least January 1, 2018,” Racine’s lawsuit said.
The lawsuit said the RFP’s conditions were needed because of the complexity of wireless plans for government contracts that cover large numbers of users:
[T]o identify the best rate plan, one must know all of the rate plans that AT&T makes available as well as the individual pricing features of each plan. This might require a review of dozens or more rate plans, features, and modifiers, and, as difficult as this process would be for a single subscriber, the difficulty is greatly amplified when applied to the thousands of subscribers’ usage data and patterns at issue under a government contract.
In the context of billion-dollar, multi-year contracts with government accounts, churning hundreds or more subscribers per month, and including variables unique to these types of accounts such as shared (pooled) minutes and custom rate plans unavailable to the general public, rate plan optimization is a task uniquely suited for computerized analysis.
One category of overcharges was caused by the district having “upwards of 1,500 users with no activity on their accounts for months or even entire quarters during the relevant time period,” the lawsuit said. “AT&T provided no reports, recommendations, or analyses to identify or implement savings relating to these users and plans, as required by the Contract.”
AT&T paid $51 million in a similar settlement
In a different case involving telecom billing for states in the Western States Contracting Alliance, AT&T in September 2020 agreed to pay $51 million “to settle claims that, for more than a decade, [it] knowingly ignored cost-saving requirements included in multibillion-dollar contracts offering wireless services to state and local government users in California, Nevada, and other states,” the plaintiffs’ law firm said at the time. Verizon agreed to pay $76 million in the same set of settlements, which were the result of a whistleblower lawsuit filed in 2012.
The Obama-era Federal Communications Commission in 2016 tried to fine AT&T $106,425 for allegedly overcharging two Florida school districts for phone service funded by the FCC’s E-rate program, which is paid for by US residents through surcharges on phone bills and subsidizes telecommunications for schools and libraries. The FCC dropped the case after Donald Trump became president and appointed Ajit Pai as chairman. Pai “sat on the order for four years before canceling it last year. He agreed with AT&T that the statute of limitations had run out,” The Washington Post wrote in March 2021.