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News/EventsEx-manager at MCI sues over firing a whistle-blower suit questions a pay-phone deal with the state.
July 5, 2003
By Mareva Brown After calling attention to irregularities in state pay-phone contracts worth $56 million a year, a financial manager in the Natomas office of MCI WorldCom was fired by the company, according to a whistle-blower lawsuit filed against the telecommunications giant. Last summer, Jimmy Shao discovered a subcontractor MCI paid to service the pay phones never performed the work, according to the lawsuit. In some cases, telephones that were listed as being serviced did not exist, according to Shao's attorney. The state contract allows MCI to operate 4,700 public pay phones and about 3,000 additional pay phones inside California prisons. It also requires MCI to maintain and regularly service each telephone. When Shao brought the irregularities to the attention of his supervisor and began to question whether other contracts should be examined, he was told to "cut it out," according to the lawsuit filed last week in Sacramento Superior Court. The lawsuit, alleging Shao was laid off in violation of the state's whistle-blower statute, seeks unspecified monetary damages and an injunction against MCI to prevent it from continued wrongful billing. MCI spokeswoman Claire Hassett said Tuesday she was familiar with the case but could not discuss it. "Unfortunately, I can't provide you with any comment," she said. "As a matter of policy, we don't comment on pending litigation." According to state Department of General Services data, MCI holds 85 percent of the state's pay-phone contracts. The rest are maintained by Verizon. While the public phones are typically a break-even investment, the telephones located in prisons are highly lucrative because inmates can make only collect calls. State contracts therefore are deliberately structured to include a mix of public and pay telephones, according to DGS spokesman Robb Deignan. Shao, who supported his wife and infant on a $48,000-a-year salary, audited about six vendors for MCI in addition to the subcontractor that services pay phones, according to his attorney. During his 10 years with the company, Shao worked in customer service and accounting before becoming a financial administrator. From 1997 until he was laid off in December 2002, Shao was the sole auditor on the pay-phone account with the state. In 1999, Shao discovered invoices from the subcontractor that did not match maintenance reports, according to the lawsuit. Specifically, maintenance and repairs that were being charged to MCI were not reflected in the work orders that were submitted to the subcontractor. When he tried to pursue the issue, Shao was told that the general manager had resigned from the company that performed the maintenance work. Instead of dropping the matter, Shao told his manager he was concerned that the subcontractor was defrauding MCI. He was not encouraged to pursue the investigation, according to the lawsuit, which also claims that three top executives of the subcontracting firm socialized extensively with Shao's manager. In July 2002, as MCI was renegotiating its contract with the state, Shao again pressed his supervisor to allow a fuller investigation. His supervisor told Shao to "cut it out," the lawsuit says. "They didn't want to rock the boat because the same contract that obligated them to work on the public phones included the prison phones," said Daniel O'Donnell, Shao's attorney. "They didn't want attention focused on the public pay phone problem." Shao, nonetheless, took the issue to another supervisor, who recommended he contact MCI's human resources department, according to the lawsuit. In August 2002, about the time Shao talked to a human resources representative, Shao's supervisor began to "harass (him) with baseless criticisms of his work," according to the lawsuit, which notes that Shao's job evaluations usually described "excellent" work. He was laid off Dec. 6. "Jimmy was really loyal to MCI," his attorney said. "He worked hard. ... And then he found this problem, and he pointed it out, and they fired him. He feels very betrayed."
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