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Report: Feds Probing MCI Again

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AP
Federal prosecutors have opened an investigation into whether long-distance giant MCI defrauded other telephone companies of hundreds of millions of dollars, The New York Times reported Sunday.

Investigators are looking into reports that MCI masked long-distance calls as local calls to avoid paying special-access fees to local carriers across the country, The New York Times reported, citing people involved in the probe.

The fees are the largest single source of MCI's costs for carrying calls and transmitting data, the newspaper said.

WorldCom Inc., which merged with MCI in 1999, changed its name to MCI earlier this year in a bid to restore its credibility after investigators uncovered an $11 billion accounting fraud.

MCI executives told the Times they believed the investigation was an effort by rival phone companies AT&T, SBC Communications and Verizon to thwart MCI's bid to emerge from bankruptcy.

"Access charges between local and long-distance carriers have existed for decades and are routine in the industry," MCI said in a statement Saturday. "As always, we take all inquiries by the U.S. Attorney's Office very seriously and will cooperate fully with any investigation."

Investigators believe MCI may have disguised long-distance calls by routing domestic calls through Canada or by redirecting them through small, local telephone companies, the Times said. Local telephone traffic is generally not subject to access fees, and fees for calls routed through Canada may have been shifted to rival AT&T, the Times said.

The Times said the investigation was launched by federal prosecutors in Dallas after Texas customers of SBC Communications reported that long-distance calls were showing up as local calls on their caller-identification systems.

Investigators believe phone codes may have been altered to disguise where the calls originated. A corporate whistleblower also tipped off federal prosecutors in New York, who are now overseeing the investigation, the Times reported.

Former MCI executives and AT&T, SBC and Verizon have provided evidence MCI is still avoiding paying access charges, the Times reported.

Verizon told The Associated Press on Saturday it was aware of the case.

"This a matter of grave concern to Verizon and we're going to cooperate with authorities in every way possible," said Peter Thonis, a spokesman for Verizon.

AT&T spokeswoman Claudia Jones said the company does not comment on matters under investigation, but is cooperating with authorities. SBC had no immediate comment.