MCI disputes AT&T charges on call routing

MCI has so far found nothing wrong with the company's call routing practices, after what MCI officials call an extensive internal investigation, even though rival telecommunications carrier AT&T Corp. filed a lawsuit against MCI Tuesday for allegedly dumping expensive phone traffic onto AT&T's network.

MCI has asked AT&T to share its evidence pointing to illegal practices, said Anastasia Kelly, MCI's general counsel, but AT&T has declined to give MCI that information. The MCI investigation into its least-cost telephone call-routing practices continues, Kelly said, and MCI is looking at records going back about 10 years to look for evidence of call-routing fraud.

"We have basically turned this place upside down, I would say, talking to numerous people, reviewing mountains of documents, and we still conclude what we have publically stated on the record before, that we have found nothing that substantiates the allegations AT&T has made against us," Kelly said.

AT&T has not shared its evidence with MCI, because the issue is now part of an active lawsuit, said AT&T spokesman Jim Byrnes. But AT&T's allegations, both in the lawsuit documents filed Tuesday, and in earlier documents filed with the court reviewing MCI's bankruptcy plans, contain detailed information about the fraud MCI is accused of, Byrnes said.

Byrnes pointed to a section of the lawsuit document detailing an "outright theft" of AT&T revenues where MCI allegedly rerouted long-distance calls made to its Phoenix, Arizona, telephone network through Canada and back to Phoenix on AT&T lines so that AT&T would have to pay termination charges on those calls. AT&T accuses MCI and local telephone carrier Onvoy Inc. of using this type of call rerouting to shift tens of millions of dollars worth of phone line charges from MCI to AT&T.

MCI, facing a confirmation hearing starting Monday on its plan to come out of bankruptcy, has defended the practice of routing calls across networks to get the best price -- called least-cost routing -- as common to the telecommunications industry.

"This is not least-cost routing," Byrnes said of the accusations in the lawsuit. "This is fraud designed either to save MCI money at the expense of AT&T or to increase MCI's revenue."

MCI, still legally known by its prebankruptcy name of WorldCom Inc., is cooperating with the U.S. Attorney's Office for the Southern District of New York in its investigation of the MCI practice, Kelly said. In late July, the U.S. Attorney's Office disclosed that it was investigating MCI after AT&T and two other long-distance companies had accused MCI of using the rerouting practice since July 2001.

AT&T also questioned whether MCI was endangering U.S. national security by rerouting U.S. government calls through Canada. MCI calls, including nonsecure U.S. government calls have been routed through Canada, Kelly said, but there are no laws against doing that.

"There is nothing wrong or illegal about that, and national security and secure traffic was not jeopardized in any way," Kelly said. "We feel very strongly about that finding."

MCI's bankruptcy confirmation hearing, scheduled to last two weeks or longer, starts Monday in a New York court. In the hearing, the bankruptcy judge will hear objections to MCI's plan to emerge from bankruptcy, which the company filed for in July 2002, after revelations of a multibillion-dollar accounting fraud. The hearing is not directly related to the AT&T accusations, although AT&T has made the same accusations contained in its lawsuit to the bankruptcy court. "It's becoming clear to us that AT&T's true motivation is to damage us in the marketplace, rather than deal with what is nothing more than a commercial dispute," Kelly said.

Kelly said she wasn't sure how long the internal MCI investigation into AT&T's accusations would take. Asked about the fallout if the investigation would eventually uncover some wrongdoing, she said: "If we find anything wrong that needs to be resolved, we will do the right thing. We think that's only going to have a positive impact on our image and our conduct and our strength going forward."

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