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AT&T files racketeering lawsuit against MCI/WorldCom, Onvoy over ‘Canadian Gateway Project’

AT&T Corp. today filed a lawsuit in federal district court against WorldCom Inc. and Onovy, Inc., seeking damages f...

September 2, 2003  

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AT&T Corp. today filed a lawsuit in federal district court against WorldCom Inc. and Onovy, Inc., seeking damages for, among other things, violations of the civil provisions of the Racketeering Influenced and Corrupt Organization (RICO) Act and other U.S. laws.

AT&T’s complaint and a bankruptcy court filing also being made today noted that this lawsuit seeks post-petition damages resulting from WorldCom’s continuing business operations.

The lawsuit accuses WorldCom, which currently conducts business under the MCI brand name, and Onvoy, a regional telecommunications provider based in Minneapolis, of orchestrating a scheme called the “Canadian Gateway Project,” in which they worked with other telecommunications companies to reroute MCI customers’ domestic phone calls through Canada to deceive and defraud AT&T into paying hefty termination fees for terminating calls to high-cost independent telephone companies in the U.S.

MCI is headquartered in Ashburn, Va., and the suit was filed in U.S. District Court for the Eastern District of Virginia.

The lawsuit also cites as defendants unknown individuals or entities referred to in the lawsuit as “John Doe’s 1-20.”

The lawsuit alleges, among other claims, fraud, civil conspiracy, unjust enrichment, racketeering conspiracy and substantive racketeering through a pattern of multiple acts of mail fraud and wire fraud.

AT&T said it recently discovered the existence of those claims as a consequence of a Federal Grand Jury investigation. AT&T also maintains the scheme is ongoing and that MCI and Onvoy continue to engage in the misconduct.

The conduct alleged in the lawsuit involves a fraudulent call-routing scheme that is fundamentally different from legitimate routing practices widely employed in the telecommunications industry.

That legitimate conduct involves long distance companies obtaining the lowest access fees knowingly offered. In contrast, the lawsuit alleges that MCI/WorldCom used deception to cause AT&T unwittingly to pay the full access charges MCI/WorldCom should have incurred on a large number of calls, the company said.

In addition to the claims related to the previously reported “Canadian Gateway Project,” the lawsuit alleges for the first time an MCI/WorldCom scheme to fraudulently cause AT&T to pay access fees to MCI/WorldCom itself.

Both MCI and Onvoy have denied any wrongdoing. MCI said the filing makes “sensational accusations wholly unsupported by evidence or law.”