MCI to Settle Claims of Excessive Charges

MCI Inc. has agreed to pay $27 million to settle claims that it defrauded the federal General Services Administration by charging excess costs and fees under a government contract, the Justice Department announced.

The settlement was approved Tuesday by the U.S. Bankruptcy Court, which is presiding over the financial restructuring of the company once known as WorldCom Inc., of which MCI was a part.

The second-largest U.S. long-distance phone company was accused of overbilling the General Services Administration for communications services starting in 1999. WorldCom renamed itself MCI after emerging from the largest bankruptcy in U.S. history last month and shedding more than $35 billion in debt.

Under the court-approved agreement, the administration also will receive $670,000 in credits from MCI.

The allegations of overbilling stemmed from a lawsuit filed by a telecommunications specialist, John Russo, under the federal False Claims Act, which allows private citizens to sue on behalf of the U.S. When the terms of the agreement were announced last month, WorldCom said the billing dispute had been caused by “conflicting language” in a contract.

“This settlement illustrates the Justice Department’s determination to recover funds that are owed to the United States,” said Peter Keisler, assistant attorney general for the civil division.

MCI spokesman Peter Lucht said any errors in billing were not intentional and pointed out that the General Services Administration had reinstated MCI to bid for new government contracts.

“The dispute essentially involved differing interpretations over contract language,” he said. “MCI’s position was asserted in good faith, and the company had worked with GSA to resolve this over the past months.”

*

Associated Press and Bloomberg News were used in compiling this report.