Spring Nextel affiliate accused of inflating sales
Its Hawaii operation is accused of placing phony credits on customers' bills
A Sprint Nextel Corp.
affiliate in 2006 fraudulently inflated the sales volume of its phones in Hawaii before it was acquired, according to Circuit Court lawsuit.
Joanne Marie Toledo Hamm, a former company executive who filed the suit yesterday, said she told superiors she had learned employees of a Nextel reseller were ordering new phones for customers who hadn't asked for them. At the time, Sprint was negotiating the acquisition of that business, which it bought for $6.5 billion in June 2006.
"Prior to my termination, I reported to my manager at Sprint that it had deceived its customers and presented a false financial picture by relying upon thousands of fraudulent and nonexistent sales by the company it merged with," Hamm said in a statement provided by her attorney.
Sprint spokeswoman Leigh Horner said the company thoroughly reviewed the practices of the reseller, Nextel Partners Inc., before it acquired it. Hamm was fired after an investigation spurred by allegations of ethical violations, Horner said.
"It had nothing to do with things she raises" in the lawsuit, Horner said.
Sprint, based in Overland Park, Kansas, acquired wireless carrier Nextel Communications Inc. for $36 billion in 2005. A clause in Nextel's reseller agreement with Nextel Partners required the merged company to buy that affiliate, which it did one year later.
The companies settled on the $6.5 billion price after four months of legal sparring. Nextel Partners provided Nextel's walkie-talkie service to businesses in smaller cities such as Fargo, N.D.
Nextel Partners employees had been ordering new phones for customers and, instead of delivering them, were moving them from one part of the warehouse to another, according to Hamm. They disguised the sales with phony credits on customers' bills, she said.
"Sprint was effectively paying NPI for sales of equipment and services (activations) that did not exist," according to Hamm's complaint.
Horner said Sprint vetted Nextel Partners' practices for counting subscribers and made changes as part of the merger. The company cut off severance pay for two former Nextel Partners employees upon finding that they didn't use methods the company endorsed, she said.
"All of this happened prior to the allegations" from Hamm, Horner said. "We were very thorough in addressing those types of things."
"Hamm was fired in 2007 after 15 years with the company, according to her attorney, Jerry Hiatt. She claims she was fired for complaining about the alleged fraudulent practices -- a violation of the state's whistleblower law.
She also claims age and gender discrimination in a 67-page complaint seeking unspecified money damages.