By Jonathan Stempel and Sinead Carew
Nov 7 (Reuters) - AT&T Inc will pay $3.5 million to settle federal charges that it had overbilled a U.S. government fund meant to help customers with hearing and speech impairments, an activity that officials said enabled people in Nigeria and other countries to pursue credit card fraud.
AT&T was not implicated in the frauds.
Thursday's settlement resolves allegations concerning the Telecommunications Relay Services Fund, which is intended to compensate carriers for the extra costs of placing calls on behalf of people who have difficulty hearing and speaking.
The U.S. Department of Justice said that from December 2009 to December 2011, as many as 80 percent of calls for which AT&T sought reimbursement were ineligible because the callers were not impaired, or because the calls were placed outside the country.
Investigators said it was common knowledge among AT&T communication assistants that many callers were from Nigeria and other foreign countries, and that these callers used the system to defraud U.S. merchants by ordering goods with stolen credit cards and counterfeit checks.
AT&T, the largest U.S. phone company, in May had agreed to pay $18.25 million to settle related charges by the Federal Communications Commission.
The additional $3.5 million settles claims from a case under the federal False Claims Act that Constance Lyttle, a Pennsylvania whistleblower, first brought in 2010. Lyttle will receive $525,000, or 15 percent, of the settlement amount.
"While we continue to deny the allegations, we concluded that the most productive course was to resolve what was left of the litigation," an AT&T spokesman said.
Dallas-based AT&T no longer offers the service that was the subject of the lawsuit.
The company's shares were down 0.9 percent at $35.50 in midday trading.
The case is U.S. ex rel. Lyttle v. AT&T Corp, U.S. District Court, Western District of Pennsylvania, No. 10-01376.