Telcom Fraud: The Previous Generation

theodp writes "Remember back in the day when telcom firms were charged with simple, good old-fashioned consumer fraud? AT&T and Lucent got a history lesson Friday, agreeing to a $300 million settlement related to claims that they used confusing billing statements to mislead consumers into paying lease charges for their home telephones, including the timeless rotary Traditional, that totaled many times more than the actual value of the phones."

Comments

Great for the lawyers.

[ejaytee]

Well great, so a practice that appears questionable at best is coming to a close.

Here's my problem with the universe of class action lawsuits: out of this $300 million, the lawyers are going to take 30% or so. This is a tidy little sum. The people who were gouged are going to end up with not-so-much relative to the amounts they were "overbilled". Probably less than the inflation-adjusted price of a Princess telephone.

The article even mentions that some of the settlement money comes in the form of calling cards donated to charity. This doesn't remediate the damage to the class in any way whatsoever, but it does help to pump the total value of the settlement (and hence the total value of 30% of the settlement.)

The class-action phenomena is great for lawyers who can come up with new and innovative reasons to sue companies for large sums of money.

Where it's abused, they cost all of us (the end users) a little bit of money, earn the litigators a lot of money, and often accomplish nothing more than what could be accomplished with a press conference or two to bring pressure on the company to stop.

Perhaps I am just growing cynical.

How much is AT&T making on this settlement?

[guttentag]

Lucent's results for the third quarter ended June 30 include $162 million in costs for its part of the settlement, spokesman John Skalko said. AT&T, the largest U.S. long-distance phone company, is paying $130 million before taxes, spokeswoman Sue Fleming said.

So how much are our friends at AT&T making in profit on this settlement after taxes? You have to realize that being AT&T, the company will get a special tax break for agreeing to the settlement, another tax break to cover the lost business it expects as a result of the bad PR from this settlement, a tax break for having the word American in its name, a tax break for being AOL, a tax break for not being NTT, plus revenue for providing the months of teleconferencing service that allowed the parties involved to come to a mutually beneficial settlement.

Note that comparatively tiny Lucent actually had to pay money in its part of the settlement.