Onvoy Inc., the St. Louis Park telecom firm implicated in a federal investigation of alleged long-distance fraud by MCI, is being accused by a former employee of having run an unorthodox call tracking system in 1999 and 2000 that made it difficult for even Onvoy's own finance department to follow the company's routing of MCI calls through Canada.

Greg Merritt of Blaine, a product manager at Onvoy in 1999 and 2000, said Onvoy's accounting of MCI long-distance calls handled by Onvoy's Gateway service was unusual and could have created at least the potential for accounting abuse. The Gateway service routed MCI long-distance calls into Canada to save money; eventually the calls were returned to their destinations in the United States.

But Onvoy CEO Janice Aune said Merritt's charges were false. She said Merritt "was let go by Onvoy" before she joined the company because "there were questions of competency." She said his comments reveal a lack of technical knowledge.

Onvoy CEO Janice Aune refutes the allegations.

Merritt said he lost his job at Onvoy in July 2000 because of a reorganization.

Merritt's remarks follow those of an anonymous whistle-blower who told federal investigators in New York that Onvoy and MCI were involved in fraud that resulted in illegally shifting access charges from MCI to AT&T. Access charges are the fees paid by long-distance firms to local telephone companies to reach their local customers.

The allegations are complicated by the fact that routing long-distance calls through Canada to achieve lower costs is not illegal and that the process of sending calls over a circuitous path, called "least-cost routing," is common in the industry.

Aune said that while Onvoy's management "has no knowledge of any improper or illegal activity" by the firm, it is complying with a federal request for information about MCI and Onvoy's dealings by hiring the Minneapolis law firm of Lindquist & Vennum to conduct an independent investigation. That investigation is expected to last 60 to 90 days.

Merritt said Onvoy's most serious accounting problem in connection with the MCI fraud investigation was that Onvoy's Gateway service took long-distance calls from MCI and shifted them to a part of Onvoy, called Private Line, that normally handled data transmission instead of voice calls. That made the calls difficult to track, even for the firm's auditors, he said.

Sales executives in the Private Line group resisted inquiries from Onvoy's finance department about why the long-distance voice calls from MCI weren't being handled by Onvoy's regular long-distance operation, Merritt said. Employees in Private Line were discouraged from giving the finance department any information about the use of the Gateway service to route MCI voice calls to Canada, he said.

"There was no suggestion that anything was illegal," Merritt said. "But there was very high secrecy around the whole thing."

Spoke to FBI

Merritt said he volunteered his criticism of Onvoy on Thursday after giving the same information to the FBI on Wednesday but insisted that he is not the anonymous whistle-blower in the Onvoy-MCI investigation.

Merritt's employment profile appears not to fit the description of the whistle-blower in federal documents. A 13-page sworn statement provided by the whistle-blower to the U.S. attorney's office in New York last month described the whistle-blower as a network engineer who left MCI in 1995 to work at Onvoy and who lost his job as part of Onvoy employment cutbacks this year. Merritt said he was a product manager who arrived at Onvoy in 1999 from Denver-based Internet Communications, a firm that is no longer in business.

The whistle-blower told federal investigators that the alleged MCI-Onvoy scheme worked this way: MCI long-distance calls were routed by Onvoy's Gateway service to Manitoba Telecom Services of Winnipeg, Manitoba. The whistle-blower alleged that Manitoba Telecom changed the codes on the calls to make it appear that they had originated in Canada, thus tricking AT&T into paying the access charges for terminating the calls when they were sent back to the United States via an AT&T line.

But Roger Ballance, executive vice president of sales and marketing at Manitoba Telecom, said Tuesday that his firm did not alter any information that detailed the origin and destination of MCI long-distance calls that were routed to his firm by Onvoy.

Merritt said the way the MCI calls were handled by the Onvoy Private Line group created problems in tracing whether any improprieties occurred. Because the division normally handled data calls in which minutes of use were not important, it was not set up to calculate the costs and revenues from a call by counting minutes of connect time. The net result was that the MCI calls routed through Onvoy didn't carry information about where the calls originated and where they were destined to go, Merritt said.

This made it difficult for anyone to establish a standard audit trail for the MCI calls, Merritt said. That lack of an audit trail was important because long-distance companies often, in the normal course of business, questioned companies such as Onvoy about discrepancies in the billing for calls.

"If AT&T came to Onvoy with questions, it would be difficult for Onvoy to say whether a particular call went through the Gateway," Merritt said. "It was hard to say how many minutes long a call was, or where it originated, because it didn't go through the Onvoy tandem switch [a call-switching computer] in the normal way. Instead, it was directed out to a private line that took the call to Manitoba Telecom."

Merritt said that the situation seemed odd to him but that as a new employee he was "reluctant to make any kind of waves" by questioning Onvoy's business practices.

Merritt also alleged that Onvoy's use of the data telephone line to ship MCI calls to Canada stripped out information transmitted with the calls that identified where they came from and where they were going. That could have allowed someone in Canada to fabricate the information to show that the calls originated in Canada, he said.

Information separated

However, Ballance of Manitoba Telecom said it was technically impossible for his firm to alter the MCI call origin and destination data because that information traveled a separate route through the telephone system from the call itself and was never in the possession of Manitoba Telecom.

"We never had the origin or destination information in our hands in the first place, and we wouldn't have changed it if we had," Ballance said.

Merritt said tracing the MCI calls was difficult, not only because of the unusual way that Onvoy managed them, but also because of changes Onvoy was making in its corporate accounting and billing systems.

At the time the Gateway project was getting started, Onvoy was putting in a new accounting system as it tried to combine three different business operations into one corporate entity, Merritt said. The changes, while made for logical reasons, made it more difficult to track the costs and revenues of the Gateway calls because many accounts received new numbers in the accounting system, he said.

At the same time, Onvoy was preparing for the much-anticipated Y2K computer crisis by installing a new billing system for fear that the old one might stop dead when the clock on the computers turned over on Dec. 31, 1999.

While business reported few if any problems from Y2K, most companies spent heavily on computers and software to avoid problems.

But Merritt said delays in completing the new Onvoy billing system introduced a potentially significant flaw into Onvoy's billing. The new system didn't begin working until January 2000, but by then the old billing system had quit working because of the Y2K problem. That meant there was no way to compare the results of the new and old billing systems, Merritt said.

"I don't have any hard evidence, but the tracking of the Gateway project could have slipped through the cracks because of this," Merritt said. "There was certainly a window of opportunity where that could have happened."

Onvoy audits

But Aune said she oversaw 18 months of audits after she joined Onvoy in September 2000, and they uncovered nothing of the sort Merritt described. She said the audits were undertaken because Onvoy had not completed an audit since 1998 because of a change of auditing teams and resulting disagreements over accounting issues.

"We have been so open about how [the management team] got into this business, how we cleaned it up and restructured its strategy and its concept of corporate governance," Aune said. "It's tragic right now that we have these people trying to get their 15 minutes in the news."

Aune said that, in addition to being false, Merritt's allegations were technically incorrect.

"It appears to me that he has no technical knowledge, and what he says comes across as nonsensical," Aune said.

She added that Onvoy might take legal action against anyone who gave false information about the company. Those making statements "need to be concerned about Onvoy's legal recourse," Aune said.

Star Tribune

-- Anonymous, August 02, 2003