Ninth Circuit Clears Telecoms in Whistleblower Claim

SAN FRANCISCO (CN) — The Ninth Circuit on Monday dealt a final blow to a career prosecutor whose whistleblower lawsuit claimed the nation’s largest telecommunications provider bilked the federal government for surveillance services for two decades.

The Ninth Circuit panel affirmed dismissal of prosecutor John Christopher Prather’s whistleblower suit for lack of subject matter jurisdiction, finding he was not an “original source” of information on whether AT&T, Verizon, Sprint et al. had overcharged the government for wiretapping services and had not voluntarily told the government what he knew before suing, as required by the False Claims Act.

“Prather fails to satisfy either of those requirements,” U.S. District Judge William Sessions wrote for the court. Sessions, from the District of Vermont, sat on the panel by designation.

Prather was working for the New York Attorney General’s Organized Crime Task Force, and later for the Metropolitan Transportation Authority’s Office of the Inspector General, in the 2000s when he noticed the cost of government wiretapping services surging wildly.

He claimed that before the mid-1990s, starting a wiretap entailed a lot of work for the telecoms: attaching a bugging device to a telephone and setting up a separate line on which law enforcement could listen to conversations. But the advent of cellphones meant that telecoms had only to turn a switch to start a wiretap, Prather said.

He said the reduced labor should have lowered costs, but that the telecoms began charging law enforcement agencies, including the FBI and the Justice Department, fees 10 times higher than they should have been.

Prather, who reviewed the telecoms’ rate sheets and developed surveillance budgets as part of his duties supervising wiretapping activities, grew suspicious, and filed a qui tam action in 2009 under the False Claims Act.

U.S. District Judge Charles Breyer dismissed his claims in 2013 for failing to show that he was the original source of the information he had disclosed to the Federal Communications Commission in 2004 about the telecoms’ alleged fraud.

Before the False Claims Act was amended in 2010, it defined an original source as someone who has direct knowledge of the information on which an allegation is based and who has voluntarily told the government about it before suing.

Prather claimed he had direct knowledge of the telecoms’ fraud based on the invoices they sent to the Organized Crime Task Force, his knowledge of average wiretap costs and his experience setting surveillance budgets.

But the Ninth Circuit affirmed Breyer’s ruling on Monday, finding that Prather did not have direct knowledge sufficient to qualify him as an original source.

The 24-page ruling states that Prather acknowledged he did not know what technologies were used for surveillance, what labor was actually performed and how much it cost.

Mark Haddad, an attorney for the telecoms, argued at a September hearing at the Ninth Circuit that the telecoms’ costs actually rose after the upgrades.

“As is evident from his speculative allegations, Prather did not have firsthand knowledge of the true costs of the transactions underlying his FCA suit,” Sessions wrote on Monday.

The panel also found that Prather’s fraud disclosures to the FCC in 2004 were not voluntary because his supervisor had ordered him to make them.

At the September hearing, Prather’s attorney John Balestriere said the supervisor had ordered Prather to give the FCC information only on the costs of implementing the Communications Assistance to Law Enforcement Agencies Act, or CALEA, passed by Congress in 1994. Prather then asked the supervisor’s permission, twice, to include information on the overcharges, making his disclosure voluntary.

The FCC had been seeking comment on the cost of CALEA, which gave telecoms $500 million to update eavesdropping capabilities.

“The fact remains, however, that he was asked to submit affidavits on behalf of his employer,” Sessions wrote. “Although he had suspected fraud for many years and raised those suspicions within the NYOAG [New York Office of the Attorney General], he made no effort on his own to alert the FCC or any other federal agencies of his theories prior to 2004.”

Balestriere said in an email Monday that Prather and his legal team disagree with the ruling, and are discussing their next move.

“Christopher Prather is the kind of individual that the courts should want to encourage to come forward,” Balestriere said. “The record here shows that no one else revealed what Chris, of his own volition, chose to bring forth. Only after he came forward and initiated his suit did at least one of the telecommunication companies reduce the rates which it charged to the government. “

In addition to challenging dismissal, Prather sought to intervene in the government’s case. Had he succeeded, he would have received a portion of the government’s recovery.

The court has yet to issue a decision in the government’s case or on Prather’s request to intervene.

“We are pleased that the U.S. Court of Appeals for the Ninth Circuit affirmed the trial court’s decision, which was well supported by the record, to dismiss this case,” AT&T spokesman Marty Richter said in an email.

Defendants in Prather’s whistleblowing case were AT&T, Cellco Partnership dba Verizon Communications, Qwest Communications International, and Sprint Nextel.

Joining Sessions on the unanimous panel were Ninth Circuit Judges Marsha Berzon and Ronald Gould.

Attorney Haddad is with Sidley Austin in Los Angeles, Balestriere with Balestriere Fariello in New York City.