Verizon Deal Ends Inquiry Over Fees - New York Times

WASHINGTON — Verizon Wireless, the nation’s largest mobile phone carrier, will pay $25 million to end an investigation into complaints that it had charged 15 million cellphone customers unauthorized data fees over the last three years, the Federal Communications Commission announced Thursday.

Verizon announced this month that it intended to refund money to its customers for the unauthorized charges. Under a consent decree with the F.C.C. announced Thursday, the company also will pay a minimum of $52.8 million in refunds.

The $25 million settlement is the largest payment under a consent decree in the F.C.C’s history, said Michele Ellison, chief of the agency’s enforcement bureau.

“Today’s settlement requires Verizon Wireless to make meaningful business reforms, prevent future overcharges and provide consumers clear, easy-to-understand information about their choices,” Ms. Ellison said. “I am gratified by the cooperation of the Verizon Wireless team in the face of these issues and pleased they are taking the high road.”

In a statement, Verizon said: “We are a company that listens to its customers and in this case we got to the bottom of a problem and resolved the errors. We have taken this action because it is the right thing to do.”

The long road to the settlement began in November 2007, when customers first started experiencing and then complaining about mysterious $1.99 charges on their monthly phone bills for data sessions that they had not initiated.

The F.C.C. said it started investigating last January after a large number of customer complaints about the charges and after reports in 2009 in The Plain Dealer of Cleveland and The New York Times.

The charges affected customers with a “pay as you go” plan for data or Internet access. Verizon said the “vast majority” of the erroneous charges were incurred when software that was preloaded on some phones automatically contacted Verizon’s data service in what the company called an “acknowledgment” session.

Verizon said that in September 2009 it put in place a feature to limit those inadvertent charges. In addition, the company said it had sometimes accidentally charged customers for access to Web sites through links that were not supposed to lead to data charges. Many customers complained that if they had accidentally hit a wrong button on their flip phones, they would be connected to the Internet and charged a $1.99 fee.

The F.C.C. required and Verizon agreed to take steps to prevent such charges in the future. The company said those steps included software changes to remove automatic acknowledgments between Verizon data centers and phones, and new internal controls that would prevent charges when customers accessed free Web site links. In addition, the company will put in place a data charge task force to monitor and resolve complaints. The task force must report regularly to the F.C.C.

The F.C.C. and Verizon also agreed that the company would initiate customer service improvements, including clearer explanations of its pay-as-you-go data charges and ways for customers to avoid extra charges; an online video tutorial to help consumers understand their bills; and additional training for Verizon customer representatives on pay-as-you-go plans.

Verizon has begun notifying customers eligible for refunds, and it will apply credits or, in the case of former customers, mail checks for the refund amounts in October and November. Most of the credits range from $2 to $6, Verizon said. About 77 million of its customers, or roughly five out of six, are unaffected, the company said.

Customers who do not receive a refund but believe they had unauthorized data charges can appeal and receive a resolution within 30 days, the F.C.C. said.

Julius Genachowski, the F.C.C. chairman, said the settlement “will serve as a significant deterrent to others in the future.”

Mr. Genachowski added: “Today’s consent decree sends a clear message to American consumers — the F.C.C. has got your back. People shouldn’t find mystery fees when they open their phone bills, and they certainly shouldn’t have to pay for services they didn’t want and didn’t use. In these rough economic times, every $1.99 counts.”

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Inquiry Puts Halliburton in a Familiar Hot Seat - New York Times

In recent years, the giant energy services company has found itself under scrutiny over allegations that it performed shoddy, overpriced work for the United States military in Iraq, bribed Nigerian officials to win energy contracts and did brisk business with Iran at time when it faced sanctions.

On Thursday, a government investigation panel said that Halliburton might have played an important role in the April explosion of the Deepwater Horizon platform in the Gulf of Mexico by supplying cement that the company knew was unstable to BP, which used it to seal the well. Halliburton has repeatedly blamed BP, the owner of the well, of failing to test the cement and making other errors that led to the accident, which killed 11 people and spewed millions of barrels of crude oil into the gulf.

“Halliburton has a history of walking on the energy high beam without a net,” said Chris Ruppel, managing director of capital markets at Execution Noble, an international investment bank. “Because they have been very aggressive, working on very high-profile types of projects, when anything goes wrong, they will be front and center.”

The company, which was led by former Vice President Dick Cheney from 1995 to 2000, has drawn repeated fire for some of its past actions, mostly involving its Kellogg Brown & Root subsidiary, which it finished selling in 2007. Last year, for example, Halliburton and KBR agreed to pay $579 million to settle charges brought by the Justice Department and the Securities and Exchange Commission in connection with bribes that KBR had paid to top Nigerian officials over a decade. The companies still face criminal liability in Nigeria over the episode, which involved contracts to build a liquefied natural gas complex.

Several experts said on Thursday that the report by the staff of the commission investigating the accident could have legal and business consequences for Halliburton, which is based in Houston. Investors were certainly concerned, sending the company’s stock plunging 16 percent in the minutes after the report was released. The shares ended the day at $31.68, down 8 percent.

Halliburton had no immediate comment on the report but said it would issue a statement Thursday. A company spokeswoman did not respond to a request to discuss Halliburton’s earlier actions in Iraq and elsewhere.

In its report, investigators said that internal tests run by Halliburton found that the cement mixture it had developed for use at BP’s well, called Macondo, did not meet industry standards for stability. Halliburton had shared some but not all of the test results with BP, and the companies proceeded to use the faulty mixture.

The report did not conclude that the problems with the cement caused the disaster, but did say that they raised the likelihood that a blowout would occur.

Lawyers suing BP, Halliburton and other companies on behalf of workers killed or injured in the disaster seized on the report, arguing that it would expand Halliburton’s potential liability.

“The report makes clear for all to see that, by rushing the cement job, BP and Halliburton put their corporate profits ahead of worker safety,” Paul Sterbcow, a plaintiffs’ lawyer in New Orleans, said in a statement.

Cement failure is a frequent cause of deepwater oil well blowouts. And Halliburton, which is one of the world’s biggest producers of oilfield cements, also provided the material used in an offshore well near Australia that blew out last year.

In a securities filing this month, Halliburton defended its cement work for BP and said that if BP had properly tested the cement after it was laid in the well, “these tests would have revealed any problems with our cement.”

Oil industry experts were split on the report’s business implications for Halliburton. “It’s going to make people take a second look for other options, other cement companies,” said Donald Van Nieuwenhuise, director of petroleum geoscience programs at the University of Houston.

But Robert MacKenzie, managing director for energy and natural resources research at FBR Capital Markets, had a different view, calling the stock market response an overreaction. “I don’t think a report written by nontechnical people is going to affect industry perception,” he said, adding that Halliburton “does billions of dollars of work every year, and one job doesn’t make a reputation among their customers.”

Indeed, Halliburton, a global company with $14.7 billion in revenue last year, has weathered a string of public controversies.

While KBR was still part of Halliburton, it came under intense scrutiny for large cost overruns and was accused of shoddy work in construction projects for United States military operations in Iraq. In 2003, the Halliburton subsidiary had received a multibillion-dollar, no-bid contract from the American government for work in the war-torn country.

In 2007, Congressional Democrats criticized Halliburton for moving the offices of its chief executive from Houston to Dubai, charging that it was an effort to lower its taxes. The company countered that the second headquarters allowed it better business opportunities.

That year, Halliburton also said that it was ending its business dealings in Iran. Under longstanding American sanctions, American companies are forbidden from conducting most business with Iran.

Lee Hunt, president of the International Association of Drilling Contractors, said harsh criticisms of Halliburton were based on “attitudes that harken back to the Cheney connection and the Bush years that make them convenient punching bags.”

“They are worldwide giants in what they do, and they are thoroughly reputable,” Mr. Hunt said. “They have a strong, proven record of quality work.”

But Representative Edward J. Markey, a Massachusetts Democrat, said the company resembled Zelig, the fictional Woody Allen film character who repeatedly turned up unexpectedly at events.

“Except Zelig was innocent,” Mr. Markey said. “Halliburton thinks cutting corners is good business.”

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