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Verizon and AT&T Agree to Pay $127 Million to Settle California and Nevada Whistleblower Cases, Bringing Total Recoveries to $138.7 Million

Posted  September 24, 2020

SAN FRANCISCO, September 24, 2020 – Verizon Wireless and AT&T Mobility, the nation’s largest wireless providers, have agreed to pay a combined $127 million to settle whistleblower lawsuits claiming they overcharged California and Nevada government customers for wireless services.  The settlements in the long-running cases, brought by the whistleblower in 2012, and approved today by a California court, represent the second-largest California False Claims Act settlement in the state’s history outside of the healthcare industry. Constantine Cannon LLP represented the whistleblower and thirty California government entities that joined the California lawsuit.

Verizon will pay $76 million and AT&T $51 million to settle claims that, for more than a decade, they 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.  Other defendants, including Sprint, previously reached settlements totaling $11.7 million. Combined, the carrier defendants will pay $138.7 million to settle allegations in the lawsuits.  Defendants denied liability.

“The conduct alleged by the whistleblower was shocking: that our country’s largest wireless carriers made promises to government agencies to get their business but failed to provide the same cost-saving service many Fortune 500 companies receive,” said Wayne T. Lamprey of Constantine Cannon, who filed the lawsuit and was lead counsel. “It may be a rounding error to Verizon and AT&T, but this is real money to California and Nevada’s schools, local governments and state agencies, who spent years scraping through their budgets to pay what we now know were over-inflated bills.”

The contracts, which are among the largest public-sector telecommunications contracts in the country, mandated that government entities be charged at the “lowest cost available” and that the carrier identify “optimized” rate plans that best suited actual usage patterns that drive cost.  The carriers’ failure to live up to their contractual promises cheated California and Nevada government entities out of hundreds of millions in savings, the lawsuits alleged.

The whistleblower entity, OnTheGo Wireless, LLC, was formed by Jeffrey Smith, an early pioneer in wireless optimization at the company he founded in 1997, eOnTheGo, Inc. Smith’s company created software applications that compared rate plans offered by carriers, and eOnTheGo has provided rate plan analysis and telecommunications expense management to both wireless carriers and large corporate and government purchasers.  Through his work, Smith concluded the carriers failed to provide contractually-required cost-saving opportunities to their government customers.  OnTheGo sued the carriers under the California False Claims Act and Nevada False Claims Act, laws that allows whistleblowers to bring suit on behalf of government entities in their respective states and share in any government recovery.

The largest users among the nearly 300 state and local entities recovering money for the excessive payments are the State of California and intervenors the California State University system, the University of California system, Los Angeles County, Orange County, and the city and county governments of Sacramento and Riverside.

The whistleblower and the government plaintiffs were jointly represented by a Constantine Cannon team that included Wayne T. Lamprey, Anne Hayes Hartman, Ari Yampolsky, Sarah “Poppy” Alexander, Chris McLamb, Hallie Noecker, and Ronny Valdes, as well as litigation counsel led by Bill Carmody and Amanda Bonn of Susman Godfrey.

Smith said: “I’m immensely gratified to have helped taxpayers, and that the government will have these funds at this difficult time.  This has been a long and difficult road; the carriers fought hard.  But with the help of my lawyers, and the government agencies that jumped in, we brought home a terrific victory for state and local governments.”

OnTheGo will receive approximately 40% of the settlements as a whistleblower reward under the California and Nevada False Claims Acts.

Because wireless carriers typically offer dozens of rate-plan options at any given time and frequently change these plans’ features and costs, the lawsuit alleged that contracts placed the burden on the carriers to identify and bill using optimized plans for each government subscriber in order to spend taxpayer dollars most efficiently.  This process, known as rate plan optimization, considers each phone line’s historical usage to determine the best rate plan available for that line.  Rate plan optimization is well known in the wireless industry, and often used by large purchasers.

As each line’s usage varies month-to-month, and plan features and costs change, the cost-effectiveness of a rate plan fluctuates.  Because of this, the government contracts required, according to Plaintiffs, that the carriers to deliver quarterly reports identifying the “optimized” rate plans to the government entities.

Whistleblower attorney Anne Hayes Hartman, a partner at Constantine Cannon in San Francisco, said: “We all relate to the frustration of paying for wireless services that don’t seem to fit our needs. This case alleged that to seal a multibillion-dollar deal, the carriers promised to help public agencies find the most efficient rate plans and save taxpayer dollars. But when the time came to deliver on those promises, the carriers instead chose to pad their bottom lines.”

The California case, presided over by the Honorable Judy Holzer Hersher, is State of California et al. ex rel. OntheGo Wireless, LLC v. Cellco Partnership et al., Case No. 34-2012-00127517 (Sacramento County Superior Court). The Nevada case, State of Nevada et al. ex rel. OntheGo Wireless, LLC v. Cellco Partnership et al., Case No. CV12-03093, was pending in the Second Judicial District of the State of Nevada, County of Washoe.

You can read more about this matter on Constantine Cannon’s Whistleblower Insider blog.

About Constantine Cannon LLP

Constantine Cannon has the world’s largest international whistleblower practice, with offices in New York, Washington, D.C., San Francisco, and London. The firm’s team of dedicated whistleblower lawyers represent whistleblowers under federal and state False Claims Acts as well as the whistleblower programs of the IRS, SEC, CFTC, DOT, and others.

Constantine Cannon’s experience spans across multiple practice areas that include antitrust and complex commercial litigation, whistleblower representation, government relations, securities, and e-discovery. The firm’s antitrust practice is among the largest and most well recognized in the nation.

PRCG | Haggerty
Isaac Benjamin
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