California schools, agencies to receive bulk of $116 million settlement over wireless charges
Verizon and AT&T agreed Thursday to pay $116 million to settle a lawsuit over whistleblower claims that the wireless providers overcharged California state and local governments for years.
The lawsuit alleged the two carriers, along with Sprint and T-Mobile, violated contracts in which the carriers had promised to optimize rate plans to make sure public agencies were getting the best prices among the companies’ shifting offerings, according to a news release from the law firms representing the whistleblower and the public agencies.
“To seal a multibillion-dollar deal, the carriers promised to help public agencies find the most efficient rate plans and save taxpayer dollars,” Anne Hayes Hartman, an attorney from San Francisco-based firm Constantine Cannon, said in a news release. “But when the time came to deliver on those promises, the carriers instead chose to pad their bottom lines.”
The state of California, its public universities and nearly 300 cities, counties, special districts and other entities all signed up with the carriers under an umbrella contract, said Wayne Lamprey, another attorney with Constantine Cannon. The first contract was entered into in 2008, Lamprey said.
Jeffrey Smith, who started a business in the 1990s analyzing rate plans to find savings for big companies, was expecting to perform rate analysis for Verizon under the contract. After Verizon told him it didn’t need his services, he discovered the companies weren’t properly optimizing rates, a process that often lowers customers’ monthly bills by around 20%, Lamprey said.
Smith formed an LLC called OnTheGo Wireless and sued the carriers in 2012 under California’s False Claims Act, which allows individuals to sue on behalf of governments and collect 40% of monetary awards.
Sprint and T-Mobile, which were also sued, previously settled for $9.6 million combined, according to the release.
The carriers denied wrongdoing. Verizon will pay $68 million to resolve the case, and AT&T agreed to pay $48 million.
“An outside party took advantage of the False Claims Act and sued on the states’ behalf,” Verizon spokesman Rich Young said in an emailed statement. “Verizon settled these meritless claims to avoid a protracted legal battle that would only have benefited the plaintiff and his attorneys.”
“We complied with our contracts and the law, and we deny any wrongdoing,” AT&T spokesman Jim Greer said in an emailed statement. “However, nearly eight years after the suit was filed, the parties have decided to settle rather than continue costly and time-consuming litigation.”
About three dozen government entities — mostly cities and counties, along with the California State University and University of California university systems — joined the lawsuit. The city and county of Sacramento, along with the cities of Fresno and Rancho Cucamonga, were among them.
About 300 entities will receive money from the settlement.
Sacramento County will receive $3.1 million, the city $950,000, Lamprey said. The University of California Regents will receive $13.1 million and California State University will receive $2.9 million, he said.
The whistleblower award of 40% will come out of those totals, but not attorneys’ fees — the carriers must pay the attorneys’ fees on top of the settlement award, Lamprey said.