Avaya Pays $13.5 Million in Whistle-Blower Suit

Published on: April 20, 2011

Avaya, the Basking Ridge-based telecommunications company, has paid $13.5 million to settle a whistle-blower lawsuit alleging that it overbilled its biggest customer: the U.S. government.

Avaya paid the money last month but did not admit any wrongdoing, according to a statement Wednesday by the U.S. Attorney for the Central District of California. CIT Group, also accused of perpetuating the illegal scheme after it acquired a portion of Avaya’s customer base, separately paid $3.1 million.

The lawsuit, filed in 2004 by two former Avaya employees, claims that for more than a decade, the company knowingly billed government agencies for desktop telephones and related maintenance even after the equipment had stopped working or been replaced with newer systems. The company also changed its billing format to give one consolidated total instead of listing charges line by line, making it difficult for customers to detect discrepancies.

The alleged scheme, which lasted from at least 1994 to 2006, defrauded agencies in the federal government, California, Delaware, Florida, Illinois, Massachusetts, Nevada, Tennessee, Virginia and Washington, D.C., according to the complaint.

In a statement yesterday, an Avaya spokesman denied any wrongdoing.

"We are very pleased to put this matter behind us and have agreed to the settlement, without any admission of wrongdoing, in order to resolve the matter," said Jay Barta, a company spokesman.

The settlement is the latest in a series involving big firms accused of hoodwinking the government.

In January, Lockheed Martin agreed to pay $2 million to settle a whistle-blower lawsuit claiming it conspired to submit false claims to win a government contract. That same month, Oracle agreed to pay $46 million to settle similar allegations.

Last year, Cisco, Westcon Group North America and Hewlett-Packard all agreed to repay the government millions of dollars to settle claims it used dishonest pricing practices.

Avaya, which spun off from Lucent Technologies in 2000, went private four years ago when private equity groups Silver Lake Partners and TPG Capital purchased it for $8.2 billion. The firm currently has 19,000 employees worldwide, including about 1,000 in New Jersey.


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