The False Claims Act is used to address issues of overcharging the government for services rendered by independent, private contractors. In a recent case involving popular wireless provider Sprint, whistleblowers have alleged significant overcharges in conjunction with a contract to provide wiretapping services to federal agencies including the FBI, U.S. Marshals Service (USMS), Bureau of Alcohol, Tobacco and Firearms (ATF), and Immigration and Customs Enforcement (ICE). In sum total, the allegations allege $21 million in overcharges between 2007 and 2010.
Details of Allegations Against Sprint and Its Subsidiaries
In the Complaint, the federal government alleges serious issues with the method by which Sprint charged federal agencies for servicing involving the use of a “pen register device,” which is described as a gadget used to record or decode dialing, routing, addressing, or signaling information transmitted by a particular telephone line, but not the contents of a communication. The practice is commonly known as wiretapping and has been used for decades by law enforcement officials to gain information necessary to locate and apprehend suspected criminals.
Relying on an administrative law known as the Communications Assistance in Law Enforcement Act, the government conceded that it is responsible for paying Sprint the necessary costs in assisting the government with its information-intercept objectives. In a recent case, however, an administrative law judge concluded that, under CALEA, these “necessary costs” do not include any charges relating to the modification of equipment or facilities used to perform wiretap services. This law, as promulgated by the FCC, came about as a result of the administrative ruling in In the Matter of Communications Assistance for Law Enforcement Act and Broadband Access and Services – a case in which Sprint participated.
According to allegations, Sprint circumvented this requirement and inflated its prices up to 58 percent. These inflations were allegedly related to the costs of financing modifications to its equipment – an expense clearly prohibited by administrative order. The government points out in its complaint that the exclusive remedy for recovering this type of expense is in the hands of the U.S. Attorney General, and several limitations apply.
A spokesperson for the Sprint Corporation recently stated:
“Under the law, the government is required to reimburse Sprint for its reasonable costs incurred when assisting law enforcement agencies with electronic surveillance. The invoices Sprint has submitted to the government fully comply with the law. We have fully cooperated with this investigation and intend to defend this matter vigorously.”
If prosecuted, Sprint could pay between $5,000 and $10,000 per violation. Several state attorneys general have commented on the matter, expressing concern over this type of overcharge in light of states’ already dwindling law enforcement budgets.
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