Verizon / MCI: The Surcharges Behind the FTS2001 Settlement

Verizon paid $93,525,411 to settle False Claims Act allegations that MCI billed the General Services Administration for FTS2001 taxes and surcharges the contracts did not allow. The disputed charges included property taxes and common-carrier recovery charges added to government telecommunications invoices. Taxpayers were allegedly charged for items the contracts did not put on their bill.

The Department of Justice announced the payment on April 5, 2011. The contracts bought voice and data telecommunications services for government-wide use. Verizon Communications Inc. made the settlement payment, while its subsidiary MCI Communications Services Inc., doing business as Verizon Business Services, was the invoicing company identified in the allegations.

The FTS2001 Taxes and Surcharges Allegations

The government alleged that MCI billed GSA for federal, state and local taxes and surcharges contrary to the FTS2001 and FTS2001 Bridge contracts or applicable regulations. The Justice Department identified property taxes, common-carrier recovery charges and unallowable surcharges as charges that were not directly reimbursable under the contracts.

The alleged overbilling was in the additions to the telecommunications bill: costs the government said it should never have been asked to reimburse. Calling an item a tax or a recovery charge does not write a new payment obligation into the government’s bargain.

For someone who knows the billing decisions, the useful connection is between the description sent to GSA and the reason the company treated that item as reimbursable. That puts the focus on the people who understood the charge categories and the contract terms. An explanation of why a charge appeared can give the invoice a meaning that its label alone never supplies.

How the Whistleblower Case and GSA Investigation Met

Whistleblowers brought a qui tam case on the government’s behalf in the District of Columbia. The government joined the case for settlement, and the Justice Department credited its joint investigation with GSA’s Office of Inspector General for identifying the false claims described in the announcement. The announcement also credited the inspector general’s audit work in pursuing and recovering the overbillings.

The whistleblower case and the audit both belong in this account. One brought the allegations on the government’s behalf. The other helped pursue the billing problem. For a person who knows a contractor’s accounts, that is a reason to take their knowledge seriously: the government’s review and an insider’s understanding can meet at the same invoice.

The 2022 chapter The Federal Inspectors General, in Ethical Standards in the Public Sector, describes investigations that bring together contracts, internal memoranda and interviews with witnesses and technical experts. Applied to telecom billing, that combination gets beyond the printed charge. An internal explanation can show why the company put it there, while someone familiar with the account can explain the decision behind it. That is the value of knowing the business as well as the paperwork.

The chapter also describes audit access to computer systems and interviews with contractor employees. For a billing specialist, that reaches the process behind the printed invoice. Someone who understands how a charge category reaches an account can help explain the connection between the company’s billing decisions and the customer’s bill.

Extra Charges Also Appeared in Fastenal’s GSA Case

Fastenal agreed to pay $6.25 million over allegations that included improper delivery and sales-tax charges under a GSA contract. A GSA audit after the contract award uncovered the issues.

The connection to Verizon is the extra invoice charge. A delivery charge on a hardware order and a tax or surcharge on a telecommunications bill both require a contractual basis for making the government pay. The terms attached to the purchase matter all the way through billing. A familiar description on an invoice can conceal the disputed part of the price.

For someone in government sales, the parallel reaches beyond the product being sold. Fastenal supplied hardware and MCI supplied telecommunications services, but both settlements addressed allegations about charges added to government purchases. The contract team and the billing team see different parts of that transaction. Someone who understands both can explain where the invoice departed from the bargain.

The Whistleblower Share

The court docket’s February 23, 2012 entry records a 20% whistleblower reward from the Verizon settlement. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

What Proof Do You Need as a Whistleblower?

For a telecommunications overbilling case, the evidence connects the contract’s payment terms, the disputed invoice charge, the company’s explanation for billing it and the government’s payment. Our whistleblower experts work with you to understand those connections and what your view inside the business adds.

The federal invoice requirements identify the vendor, invoice and order, along with quantities, units, prices and required supporting documents. In a surcharge inquiry, those details help connect the charge to the purchase it was billed against. We use that connection to examine the billing practice against the government’s agreement, with your knowledge of how the business treated the charge.

Your knowledge may sit between those records. You may know how a surcharge category was used, what explanation supported it or who decided it belonged on a government account. We bring that account of the billing practice together with the documents that show what the government was asked to pay. In the Verizon / MCI matter, the named charges make the issue concrete enough for someone who knows the invoices to recognize it.

You Know Why the Charge Was There

If you handled government telecom billing and know why an unsupported tax or surcharge kept appearing, speak to one of our Whistleblower Experts about the charges you saw. We build your strongest telecommunications billing whistleblower case with you, bring in telecommunications government procurement whistleblower lawyers, and stay beside you through the pursuit of a recovery.