SEPTEMBER 20, 2011
DOJ Seeks To Limit Whistleblower Award In Verizon Case
LINK

The whistleblower who exposed allegations that Verizon Communications bilked the federal government should not receive millions more in compensation for his assistance in the case, federal prosecutors said in court papers filed this week.

Verizon earlier this year settled a whistleblower suit in Washington federal district court for $93.5 million. The whistleblowers, Stephen Shea and his company 2Probe LLC earned about 15%, or $13,725,000.

Lawyers for the whistleblowers in July asked for an additional payment of nearly $7.5 million. Shea and his company provide billing work to private clients on telecommunications contracts with Verizon and other providers.

Responding to the request for more money, prosecutors in Washington said in a court filing (.pdf) Monday the whistleblowers “contributed to the government’s recovery by initiating this civil action. However, they made only modest contributions to the actual prosecution of the case.”

Still, prosecutors said Shea and his company should receive an additional $1.47 million. An assistant U.S. attorney, Doris Coles-Huff, said in court papers that the extra amount would mean a 16% cut from the overall recovery.

The False Claims Act guarantees in some cases that a whistleblower will receive a minimum 15% cut of any government recovery. Prosecutors said Monday that whether a person should get more is based on the extent to which the whistleblower “substantially contributed” to the prosecution of a case.

The law, however, doesn’t define substantial contribution. Prosecutors urged Judge Gladys Kessler to examine the helpfulness of the whistleblower’s information and the role the whistleblower played in the prosecution and recovery effort.

In Monday’s filing, prosecutors said Shea and 2Probe had no first-hand knowledge of Verizon’s billing under a specific contract. The complaint alleged Verizon unlawfully billed the government for certain taxes and surcharges.

Prosecutors said the government’s “substantial investigation and settlement” before litigation reduced the role that Shea played in the prosecution of the case. Awards at the high end of the range, up to 25% in cases in which the government intervenes, are “restricted to only those cases which proceed to litigation and trial,” prosecutors said in the court filing.

Lawyers for Shea, represented by Phillips & Cohen, argue he provided a critical “insider” document that “cracked open the fraud and showed the illegal surcharges submitted to the United States.”

Prosecutors said in response that the information Shea provided was already in the government’s possession. Shea’s “lack of information required an extensive investigation of the allegations,” prosecutors said.

The Justice Department said that if Shea had provided information beyond speculation about Verizon’s billing, “the government would have been able to complete the investigation and settlement efforts in much less time.”

An attorney for Shea, Colette Matzzie, said in a declaration (.pdf) that Phillips & Cohen dedicated about 1,200 hours of attorney and paralegal time in the case.

Matzzie, a partner at the firm, said Shea “took very seriously his duty to scrutinize the settlement agreement closely to determine whether fair, adequate and reasonable and to provide the court with his views on the settlement.”

Kessler gave the whistleblowers until early next month to reply to the Justice Department’s position.

Verizon Agrees to $93.5M False Claims Settlement
LINK

Verizon Communications has agreed to pay more than $93.5 million to the federal government to resolve allegations the company overcharged on voice and data telecommunication services contracts, the Justice Department said today.

A whistleblower suit (PDF) filed in January 2007 was unsealed today in Washington's federal trial court, disclosing the Justice Department's decision to intervene in the litigation. Verizon transmitted the settlement funds to the government in February.

Justice officials said Verizon subsidiary MCI Communications Services Inc. billed the federal government for surcharges that included property taxes and public utility commission fees between April 2004 to September 2010.

DOJ participated in a joint investigation with the General Services Administration’s inspector general’s office.

“A government contract is not a blank check,” U.S. Attorney Ronald Machen Jr. said in a statement today. “Contractors who overbill the government will be aggressively pursued and required to make the taxpayers whole.” (Civil Division trial attorney Arnold Auerhan and Assistant U.S. Attorney Doris Coles-Huff represented the government in the settlement.)

Lawyers for Verizon, including Wiley Rein partners Roderick Thomas and Rand Allen, were not immediately reached for comment this afternoon. Thomas is chairman of the firm’s white-collar defense practice, and Allen leads the firm’s government contracts practice.

Verizon, according to the settlement agreement (PDF), denied it submitted false claims for payment for certain taxes. “This Agreement represents a compromise to avoid continued litigation and associated risks and is neither an admission of liability by Verizon nor a concession by the United States that its claims are not well founded,” the settlement said.

The government and lawyers for the qui tam whistleblower, private telecommunications consultant Stephen Shea and 2Probe LLC are still debating how much he should receive from the settlement proceeds.

A lawyer for Shea, Colette Matzzie of Washington’s Phillips & Cohen, said the dispute has been referred to Magistrate Judge John Facciola of the U.S. District Court for the District of Columbia.

Shea is entitled to a statutory minimum of 15% of the settlement—about $14 million, according to court records. In cases where the Justice Department has intervened, whistleblowers can receive a 15% to 25% cut of the settlement.

“Verizon was not only charging the government for the costs associated with communication services, but it also was pumping up its revenues by charging the government for Verizon’s own property taxes and other costs of doing business,” Matzzie said in a statement. “Under federal law, Verizon was responsible for paying those costs, not the government.”

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE, Tuesday, April 5, 2011
LINK

Verizon Communications Pays United States $93.5 Million to Resolve False Claims Act Allegations
WASHINGTON - Verizon Communications Inc. has paid the United States $93,525,410.96 in order to resolve allegations that the company overcharged the General Services Administration (GSA) on invoices dealing with government-wide voice and data telecommunications services contracts, the Justice Department announced today.

Verizon subsidiary MCI Communications Services Inc. dba Verizon Business Services is alleged to have invoiced GSA for a variety of federal, state and local taxes and surcharges in violation of the contracts or applicable regulations in connection with the FTS2001 and FTS2001 Bridge contracts. The department’s joint investigation with GSA’s Office of the Inspector General (OIG) found that Verizon and MCI submitted false claims under the contracts for the reimbursement of property taxes, common carrier recovery charges and unallowable surcharges, charges that are not directly reimbursable under the FTS2001 contracts.

“Corporations that contract to provide services to federal, state and local governments must play by the rules,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We will protect taxpayers against those who seek to charge more than they deserve.”

“A government contract is not a blank check,” said U.S. Attorney Ronald C. Machen Jr. “Contractors who overbill the government will be aggressively pursued and required to make the taxpayers whole. This $93 million recovery should make contractors realize that we are firmly committed to ensuring the integrity of corporate billing practices with respect to government programs.”

Stephen M. Shea and 2Probe LLC filed the qui tam or whistleblower complaint on behalf of the government. The case is captioned United States ex rel. Stephen M. Shea and 2Probe LLC v. Verizon Communications Inc., Civ. No. 1:07CV00111 (GK) (D.D.C.).

“This case is another demonstration of the value of OIG audits in pursuing, proving, and recovering overbillings on government programs,” said GSA Inspector General Brian D. Miller.

This settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Columbia and GSA’s Office of Inspector General and Office of General Counsel.