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AT&T Accused of Billing U.S. for Nigerian Fraud Calls

AT&T Inc. (T) got more than $16 million from the U.S. government to offer a calling service for the deaf that the company knew was being used by Nigerian fraudsters to steal from American merchants, the Justice Department said.
The U.S., which intervened yesterday in a whistle-blower lawsuit in federal court in Pittsburgh, alleges AT&T allowed an Internet-based phone system to be overrun by criminals and then improperly billed the U.S. to reimburse the calls in violation of the False Claims Act.
As many as 95 percent of the calls in AT&T’s hearing- impaired program were made by people outside the U.S. attempting to defraud merchants through the use of stolen credit cards, counterfeit checks and money orders, according to the complaint.
“Federal funding for Telecommunications Relay Services is intended to help the hearing- and speech-impaired in the United States,” Stuart Delery, acting assistant attorney general for the Justice Department’s civil division, said today in a statement. “We will pursue those who seek to gain by knowingly allowing others to abuse this program.”
The government is seeking triple damages.
Marty Richter, a spokesman for Dallas-based AT&T, said in a statement that the company followed rules set by the Federal Communications Commission for providing Internet Protocol Relay services and for seeking reimbursement for those services.

Complete All Calls

“As the FCC is aware, it is always possible for an individual to misuse IP Relay services, just as someone can misuse the postal system or an e-mail account, but FCC rules require that we complete all calls by customers who identify themselves as disabled,” Richter said.
Neil Grace, a spokesman for the FCC, said IP Relay practices are a “serious problem” that the commission is continuing to investigate.
The case stems from services mandated under the Americans with Disabilities Act that require carriers to provide voice telephone services for hearing or speech-impaired callers. Carriers, like AT&T, employ intermediaries who relay real-time conversations between the hearing and hearing-impaired callers.
So-called IP Relay, is a text-based form of the service that allows the hearing-impaired person to type text messages that the operator reads to the call’s recipient.

Government Reimbursement

The service is free to hearing-impaired callers and carriers can seek reimbursement for calls originating in the U.S. at $1.30 a minute through a fund administered by the FCC.
Since its inception in 2002, the anonymity provided by the IP Relay program has been abused by criminals outside the U.S., according to the lawsuit. AT&T in 2004, after getting complaints from merchants, determined the Internet Protocol addresses of 10 of the top 12 users of the service were abroad, primarily in Lagos, Nigeria, the government said.
In late 2008, the FCC required that providers certify that callers are eligible for the program by verifying the user’s name and mailing address before issuing a 10-digit telephone number, according to the lawsuit.
AT&T implemented a plan that mailed postcards to the addresses of users. Those who returned the card received a 10- digit number. Between April 2009 and September 2009, AT&T had registered just 20 percent of its existing users.

Company Projections

AT&T managers were concerned they would fall short of company projections for program minutes and related revenue, according to the lawsuit.
“We are expecting a serious decline in [internet relay] traffic because fraud will go to zero (at least temporarily) and we haven’t registered nearly enough customers to pick up the slack,” Burt Bossi, a manager of AT&T’s technical team, said to other managers on Sept. 22, 2009, according to the complaint.
The following month, AT&T changed its registration system from a postcard one to an Internet one where users’ addresses are compared to those on a database called DASH to determine whether the address provided exists. Registrations immediately increased to 40 to 100 a day, the government alleges.
By the end of October 2009, AT&T managers were aware that credit card scams were being conducted by new users, the lawsuit alleges.
“This is a consequence of easing registration restrictions,” Dave Claus, a technical manager, said in an e- mail to colleagues cited in the complaint.
At the beginning of 2011, AT&T noted that for 2010 the company had the highest call volume ever in the program, according to the complaint.
The case is Lyttle v. AT&T Communications of Pennsylvania, 10-01376, U.S. District Court, Western District of Pennsylvania (Pittsburgh).
To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.