FBI raids Va. offices of phone-service company

June 26, 1991|By Leslie Cauley

Long Distance Service of Washington Inc., a reseller of long-distance services that does business in Maryland, was raided earlier this month by federal authorities as part of an investigation into allegations that it has been padding customer bills, the FBI confirmed yesterday.

James Mull, an FBI spokesman in Washington, said that the search of LDS' headquarters in McLean, Va., was conducted June 11 in cooperation with the U.S. attorney's s office in Alexandria.

He confirmed that the search was related to allegations that LDS was padding the bills of its business customers, but he declined to elaborate.

The investigation, he said, "has to do with the way they [LDS] are -- I mean, were -- conducting business."

LDS officials were unavailable for comment yesterday. Calls were directed to LDS' Washington attorney, Stephen Spivack. He said that "records were taken" during the FBI raid but would not say which records they were.

According to Mr. Spivack, LDS has not been charged with any crimes, and the company continues to operate. "LDS continues to do business as it always has," he said.

An LDS statement said that the allegations against the company were made by former employees "currently employed by or associated with a competitor of LDS. These former disgruntled employees have made allegations relating to alleged events occurring four or five years ago. The bias of these former employees is obvious and needs no further comment."

LDS, founded in 1980 by a former MCI Communications Corp. executive, has been offering long-distance services to business customers in Maryland since 1988.

The company, which maintains a sales office in Baltimore, sells regular long-distance services in addition to a list of business services, including teleconferencing, calling cards and 800-number toll-free lines.

As a reseller, LDS buys service from the major long-distance companies at a volume discount, then resells those services to business customers at prices that are lower than regular rates.

In a 1988 filing with Maryland's Public Service Commission, LDS said that it had a net loss in 1986 and 1987 but anticipated a profit in 1988. In its filing, LDS projected total 1988 revenues of $12 million.

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