A handful of Internet service providers have begun negotiating with AT&T over a US$7.4 million lawsuit alleging their "unjust enrichment" from having resold the telecom giant's toll-free lines.
Meanwhile, the company at the center of alleged scam, Connect America, has disconnected its phones, and its boss is nowhere to be found.
"If you were to arrest an 18-year-old for shoplifting, you don't throw him in a cell with murderers and rapists," Frank Peters, president of Franklin Telecommunications, said Wednesday. He was referring to his and three other ISPs being lumped together with Connect America in a lawsuit filed late last month that appeared to charge the entire group with fraud and civil conspiracy.
As a result of being named in the suit, Franklin - the only publicly traded company implicated - saw its stock plunge from about $2.50 a share to $1.75.
"We got painted in there with the same paintbrush as everyone else," Peters said. "We need to be withdrawn from this suit ASAP." He confirmed that his company is already negotiating with AT&T over a possible settlement, and that the talks so far have been amicable.
Also named as defendants were Connect America of Riverside, California; OneSource Communications of Irving, Texas; Advanced Internet Service of Ann Arbor, Michigan; and Global Pacific Providers of Orange, California. AT&T says the group "defrauded AT&T of millions of dollars in unpaid charges."
AT&T clarified Wednesday that all but Connect America, a subsidiary of ICB Telecommunications, are charged only with "unjust enrichment." The fraud and conspiracy allegations center solely on Connect America and its president, Greg Evans.
"We're not saying that Franklin Telecommunications and the others were up to their elbows in this scam with Greg Evans," said Meric Bloch, a senior attorney for AT&T. "We're saying they unjustly benefited at AT&T's expense."
No one seems to dispute this. The various ISPs say they were each approached by Evans with an offer to buy some of his company's excess capacity and resell it to their customers.
What Evans did not state, the companies say, is that he had obtained the capacity by opening fictitious accounts with AT&T for about 140 toll-free lines, and that he was in turn selling off the lines at a profit. Evans could not be reached for comment, and the number for Connect America was disconnected as of Wednesday.
Franklin's Peters said he contacted both the FBI and Secret Service when he learned what was happening, and that he reported the situation to AT&T months ago. Dennis Shen, president of Global Pacific Providers, also said he called in the FBI when the alleged scam became clear.
"We're not in a position to know who said what to whom," AT&T's Bloch answered. "But we do know they received these numbers from Connect America." And that, under the narrow legal definition of "unjust enrichment," may allow the telecom company to press its case.
Still, Bloch indicated that charges against the ISPs could be resolved in short order. "As facts and testimony come out, people settle claims against some defendants," he said. "Anything is possible."
