Verizon Settles $93.5 Million Whistleblower Lawsuit

By Matt O'Donnell

(LEGAFI) -- Verizon has agreed to pay the federal government $93.5 million to settle a whistleblower lawsuit over allegations that Verizon overcharged the government for voice and data communication services.

The Verizon “qui tam” whistleblower lawsuit alleged the telecommunications giant billed the government for “tax-like” surcharges that it wasn’t entitled to impose on the government, including property tax surcharges, carrier cost recovery charges, state telecommunications relay service surcharges and public utility commission fee surcharges.

"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," said an attorney representing the Verizon whistleblower. "Under federal law, Verizon was responsible for paying those costs, not the government."

Hidden surcharges on communication services have long been a problem, prompting the General Services Administration to negotiate a firm, fixed-price contract with limited surcharges in order to help businesses and consumers avoid being hit with hidden surcharges.

The Verizon qui tam lawsuit was filed by whistleblower Stephen Shea in 2007, who alleged the overbilling began as far back as 1999, first by MCI Communications, and later by Verizon, which bough MCI in 2006. The settlement agreement covers the period from 2004 to 2010. Under the qui tam provisions of the False Claims Act, whistleblowers are entitled to 15 percent to 25 percent of the amount recovered, if the government joins the case.

This isn’t the first time Verizon has been in trouble for charging unlawful “mystery” fees. Verizon Wireless announced in October 2010 that it would refund 15 million customers $90 million in fees for wrongfully charging hidden fees. Several months later Verizon was hit with a class action lawsuit for improperly billing customers for unidentified “Get It Now” mystery fees.