By Andrew Grossman and Thomas Gryta
Sprint Corp. overcharged the Federal Bureau of Investigation,
the Drug Enforcement Administration and other law-enforcement
agencies by more than 50% to facilitate eavesdropping on phone
calls, the U.S. Justice Department alleged in a lawsuit filed
Monday.
The suit accuses Sprint of inflating the bills it submitted to
federal law-enforcement agencies for wiretaps and other
surveillance services to cover capital expenditures necessary to
respond to the requests--something prohibited by federal law and
Federal Communications Commission rules, according to the complaint
filed in federal court in San Francisco.
Sprint covered up the fact that the extra charges were included
in the bills paid by the FBI and others by disguising them as
regular surveillance costs, the suit alleges. As a result, the
federal government overpaid Sprint by $21 million over a period of
three and a half years.
Sprint said it didn't break the law and will fight the
charges.
"Under the law, the government is required to reimburse Sprint
for its reasonable costs incurred when assisting law enforcement
agencies with electronic surveillance," Sprint spokesman John
Taylor said. "The invoices Sprint has submitted to the government
fully comply with the law. We have fully cooperated with this
investigation and intend to defend this matter vigorously."
Telecommunications companies are allowed to charge law
enforcement for wiretaps, but must go through a separate process to
recoup some of the cost of setting up the systems needed to respond
to government requests.
During the period when the Justice Department said Sprint was
overbilling, the DEA racked up the largest surveillance bill: $21
million. The FBI came in second, paying $10.6 million.
The law was filed under the False Claims Act, which allows
courts to award up to three times the amount overpaid by the
government.
The bills covered wiretaps and the installation of so-called
"pen registers," which record data about incoming and outgoing
calls but not the content of the calls themselves.
In 2006, the FCC ruled that telecom carriers can't pass on the
cost of complying with requirements to have their operations
capable of government inception. Sprint revised its fees at that
time, the government alleges, but didn't lower them enough.
In 2010, the company again revised its fees to remove the
allegedly inappropriate extra costs, the government claims.
Sprint's Mr. Taylor said the change in fees came after a "periodic
routine review of rates."
The claims in the Justice Department's lawsuit echo those made
by John Prather, a former New York City prosecutor, in a
whistle-blower suit filed in 2009 against Sprint, AT&T Inc.,
Verizon Communications Inc. and other telecom companies.
Mr. Prather alleged the companies were "massively overcharging"
local, state and federal law-enforcement agencies for wiretaps. The
high charges were hard to detect, because the companies didn't
itemize their bills, he said. Agencies went ahead and overpaid,
because they were more concerned about investigations than their
phone bills, Mr. Prather said in his lawsuit. Others found
themselves strapped for cash and didn't do all the surveillance
they needed, he said.
A federal judge threw out Mr. Prather's suit in November, saying
he didn't have standing to sue. AT&T and Verizon declined to
comment.
Write to Andrew Grossman at andrew.grossman@wsj.com and Thomas
Gryta at thomas.gryta@wsj.com
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