AT&T Files Objection To MCI Reorg Plan In Light Of Recent Accusations

reorganization plan under Chapter 11.

The objection is spurred by new allegations that MCI, formerly WorldCom, rerouted traffic to Canada to avoid paying calling charges. These charges in turn were paid by AT&T and other providers as the calling traffic was terminated in the United States.

In the filing, AT&T states: "Having not yet emerged from a bankruptcy induced by improprieties arising from one of the largest financial frauds in corporate history, Debtors (MCI/WorldCom et al.) have committed a fraud against AT&T and other companies that spans the post-petition period and continues to the very date of this filing. Indeed, contemporaneous with its filing of bankruptcy with this Court, Debtors were even then amidst a scheme apparently called the 'Canadian Gateway Project,' a surreptitious plan Debtors had launched before filing for bankruptcy to misdirect hundreds of millions of minutes of calls Debtors' customers made to rural areas of the United States where costs to terminate traffic are more expensive. Debtors' scheme thus improperly unloaded millions upon millions of dollars of Debtors' operating expense upon AT&T, and allowed Debtors to continue understating and misrepresenting their true financial position in reports to this Court and elsewhere."

The filing also accuses MCI/WorldCom of knowingly and intentionally "dumping" high-cost traffic costs on AT&T.

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AT&T contends that MCI sent the traffic to network facilities operated by U.S.- based providers in the Midwest and then out of the country to a Canadian carrier, Manitoba Telephone Systems, which interconnects with Bell Canada, and in turn routed the traffic back to the United States over facilities jointly owned by AT&T and Bell Canada.

"The 'Canadian Gateway Project' is a scheme by which Debtors knowingly, intentionally, and recklessly shifted to AT&T the cost of terminating Debtors' customers' calls to areas of the United States with especially high access charges for terminating calls. Debtors were aware that AT&T tariffs and contracts did not permit the subscription directly to AT&T service for the purpose of dumping high-cost traffic upon AT&T," the filing said.

An analysis by AT&T of calls coming onto its network from Canada showed that at least 30 percent of the traffic coming to AT&T from Canada for termination in the United States had originated in the United States. The filing also said that MCI/WorldCom deliberately programmed its network to route its customer calls to high-cost rural areas through Canada.

"The financial effect of the Debtors scheme has been to injure AT&T to the benefit of Debtors, which artificially avoided millions upon millions of dollars in terminating access costs, while burdening AT&T with those untold millions in operating expense that were rightfully the Debtor's obligation," according to the filing.

MCI at this time has not responded to the accusation that it rerouted calls through Canada.