MCI Communications Corp. was accused in federal court today of filing a $900 million antitrust suit against American Telephone & Telegraph Co. in an effort to mask its financials problems at the time.
AT&T attorney George L. Saunders told a U.S. District Court jury that MCI decided to make the telephone company the scapegoat after an internal MCI audit in 1973 concluded the Washington, D.C.-based firm did not have the money to complete a proposed nationwide business phone system.
Further, Saunders said MCI has conducted the "most profitable scam in the history of American business by "surreptitiously" entering the basic long-distance telephone business.
If MCI had made the money it said it would have without the alleged anti-competitive behavior charged to the suit it would have been listed in the "top one-half of 1 per cent of all companies in the history of this country." Saunders was referring to MCI's proposed rate of growth until 1984 as laid out in MCI filings in the case.
The one-hour-and-40 minutes opening statement followed yesterday's opening argument by MCI, in which it charged that AT&T and its Bell System subsidiaries made calculated policy decisions designed to "choice off" competition from MCI.
When the case adjourned this afternoon, MCI Chairman William McGowan had taken the witness stand. His testinomy will continue tomorrow.
The case, nearly six years old, centers on charges by MCI that AT&T denied it access to interconnections the 10-year-old company needed in the early 1970s to compete in the business communications industry.
The bitter opening arguments clearly demonstrated the intense feelings on both sides of the case and further dramatized the magnitude of the charges and a subsequent contersuit by AT&T against MCI.
Further, the opening arguments demonstrated the importance of the case for the Justice Department's massive antitrust suit against AT&T, which if successful could result in the break-up of AT&T.
In beginning his presentation, Saunders told the jury of five men and seven women who will hear the case for about two to three months, that it is "fashionable to criticize and destroy anything that is successful."
Saunders, a partner of the Chicago law firm of Sidney & Austin, and a lead attorney for AT&T in the case brought by the Justice Department, said the phone company is a "prime target for that kind of irresponsible accusation." He said the telephone company is big, "no question about it," but that it offers the public the "best service in the world at the lowest price in the world."
AT&T, Saunders said, set up its interconnection and rate-making policies under its reading of a Federal Communications Commission decision which began to open up competition in the intercity telephone business. Furthermore, Saunders emphasized that AT&T's economic business decisions were based on advice during the 1960s from a three-member panel which included well-known economists William Baumol, Otto Eckstein, and Alfred Kahn, now the Carter Administration's inflation fighter.
Saunders said that MCI and AT&T negotiated a pact so that MCI could set up a Chicago to St. Louis business phone service and that those negotiations "worked" out an agreement entirely satisfactory to both sides."
"But all was not well in Washington," he charged, referring to the alleged financial difficulties facing MCI in 1973.
After MCI secured about $100 million from a bank and from a public stock offering, an MCI audit revealed that it would cost twice that figure to set up the nationwide network envisioned by McGowan.
But instead of cutting back on the plains, MCI decided to "put the blame on Bell," let the FCC know of its intentions, and threaten AT&T with a lawsuit.
Meanwhile, "We're blissfully thinking we're dealing with a company in good faith," Saunders said. But Saunders charged that AT&T received what he called a "poison pen letter from MCI in 1973," repudiating everything we had agreed on."
McGowan told then-AT&T Chairman John deButts that AT&T would have to raise its rates high enough or face an MCI lawsuit, according to Saunders, DeButts "told him no politely."
Further, Saunders charged that MCI attempted to undermine AT&T negotiations with western Union over a new rate structure by threatening Western Union with antitrust litigation.
Saunders concluded by saying the Bell System "is not perfect" but added that "we do the best we can." He said it was impossible for a com- pany with one million employes like AT&T to conduct "the kind of con- certed campaign that is alleged here."
"What we're really being charged with is being too trusting," Saunders said, referring to the negotiations with MCI.