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AT&T settles racketeering suit against MCI

The long-distance carriers settle a lawsuit in which AT&T alleged that MCI engaged in racketeering by rerouting calls through Canada.

AT&T and MCI have settled a lawsuit that charged MCI with fraudulently rerouting calls, the long-distance telephone companies said Monday.

The deal also covered Onvoy, a Minneapolis, Minn.-based wholesale dealer of broadband and telephone services, which had also been named in the lawsuit as a partner with MCI in an alleged scheme to charge AT&T full U.S. rates for calls completed through cheaper networks in Canada. Carriers are required by federal law to charge rivals the lowest possible price for call completion.

The terms of the agreement were not disclosed.

"This resolution is good for our creditors as well as both companies, overall," Stasia Kelly, MCI executive vice president and general counsel, said in a statement. "It allows us to better focus on the common good of the industry--fostering healthy competition and serving our customers."

AT&T filed the lawsuit in U.S. District Court for the Eastern District of Virginia in September 2003, accusing MCI, legally known as WorldCom, and Onvoy of violating the U.S. Racketeering Influenced and Corrupt Organization Act (RICO) and other laws.

At the time the lawsuit was filed, AT&T said its losses were in the tens of millions of dollars.

Verizon Communications and SBC Communications have made similar rerouting allegations against MCI. The carrier has denied these claims.

MCI filed for bankruptcy protection in July 2002. It was expected to emerge from Chapter 11 at the end of February, but the company recently asked for a 60-day extension in order to complete its U.S. Securities and Exchange Commission filings. The agreement with AT&T has been submitted for approval to the U.S. Bankruptcy Court in New York, the companies said.