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* U.S. files lawsuit over use of IP Relay service
* Says improperly billed FCC for reimbursement
* Alleges AT&T knew scammers were using service
* AT&T says was unaware of misuse of the service
By Jasmin Melvin
March 22 (Reuters) - The U.S. government charged AT&T Inc with cheating it out of millions of dollars by knowingly failing to prevent swindlers from using a subsidized telephone service meant for deaf people.
The Justice Department said on Thursday it accused AT&T of billing for reimbursement of calls placed by ineligible international callers who used the service for purposes such as buying goods from merchants using stolen credit cards.
In a filing Wednesday in federal court in Pennsylvania, the Justice Department joined a whistleblower suit filed by a former worker at one of AT&T's call centers.
The deaf and hard-of-hearing in the United States are offered a service at no charge to place calls to hearing individuals through text messages over the Internet that are relayed by employees of a so-called IP Relay provider.
These providers, including AT&T, are reimbursed about $1.30 per minute by the Federal Communications Commission through a fund paid for by fees added to consumers' telephone bills.
AT&T contends that it did not know foreign callers were using the system, and said it has followed the FCC's rules for providing the service and seeking reimbursement.
"As the FCC is aware, it is always possible for an individual to misuse IP Relay services, just as someone can misuse the postal system or an email account, but FCC rules require that we complete all calls by customers who identify themselves as disabled," said Marty Richter, an AT&T representative.
But the Justice Department accused AT&T of knowingly trying to skirt a 2009 FCC requirement mandating IP Relay providers verify registered users' name and mailing address. It said foreign callers accounted for up to 95 percent of call volume.
The government further alleges that AT&T implemented a registration system that did not ensure users were in the United States "out of fears that fraudulent call volume would drop after the registration deadline."
"Taxpayers must not bear the cost of abuses of the Telecommunications Relay system," said David J. Hickton, U.S. Attorney for the Western District of Pennsylvania. "Those who misuse funds intended to benefit the hearing- and speech-impaired must be held accountable."
Constance Lyttle, a former communications assistant in an AT&T IP Relay call center, filed the original lawsuit under provisions of the False Claims Act that allow whistleblowers to receive a portion of any recovered damages.
The case is U.S. ex rel. Lyttle v. AT&T Corp, U.S. District Court, Western District of Pennsylvania, No. 10-cv-1376.