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Sprint settles $21 million wiretap fraud allegations for $15.5 million

Sprint settles $21 million wiretap fraud allegations for $15.5 million

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After allegedly defrauding federal law enforcement agencies of $21 million by overcharging for wiretaps, Sprint will be settling for $15.5 million. The Department of Justice, which released the news yesterday, said that this settlement would "resolve the allegations" in the complaint. In turn, Sprint will not admit any wrongdoing in the case.

In its original complaint, the Department of Justice alleged that Sprint had falsely inflated the cost of fulfilling government surveillance orders. Phone companies are legally required to comply with court orders for specific wiretap requests. In return, they can claim reimbursement for "reasonable expenses." In 2006, the FCC clarified that this only meant the costs of performing a wiretap, and not the cost of making surveillance-friendly changes to a network, even if companies were required to do it. But in its complaint, the Department of Justice claimed that Sprint quietly kept adding upgrade-related costs to its bills between 2007 and 2010. The complaint says this effectively inflated its charges by 58 percent, split between the FBI, the Drug Enforcement Administration, Immigration and Customs Enforcement, and other agencies.

If the accusations are true, the Department of Justice is settling for far less than it could have sought in court. The complaint asks for triple the damages and extra civil penalties, as allowed by the False Claims Act. This settlement, in fact, is $5.5 million less than Sprint allegedly got by inflating the fees. At the time of the original complaint, a spokesperson said that Sprint had "fully cooperated with this investigation," and would defend itself "vigorously." In a statement today, the company further defended its billing. "Sprint provides these services to the government at a below-cost price and does not agree with the allegations that the government discounts should have been greater," the statement said. "We believe the government's application of the regulation at issue is in error. However, our company reached an agreement to settle this matter to avoid further expense and distraction of this litigation."

Update April 10th, 1:58PM ET: Added statement from Sprint.