A federal grand jury has indicted regional phone company Nynex Corp. for alleged criminal contempt of the 1982 court decree that broke up the Bell telephone system. It was the first criminal action to be brought under the landmark decree.
The indictment by a Washington, D.C., grand jury alleges that a Nynex subsidiary, Telco Research Corp. of Nashville, engaged in business barred by the decree in 1986 and 1987 by allowing long-distance company MCI Communications Corp. to dial in over telephone lines to use a computer on its premises. The seven regional companies created by the decree are barred from "information services" -- the provision of computer services over telephone lines.
Nynex spokesman Robert J. O'Brien yesterday called the allegations "fundamentally wrong" and expressed confidence a trial would clear the New York-based company. Revenue from the Telco computer in question, he said, constituted less than one one-thousandth of a percent of Nynex's total revenue.
The indictment comes as Nynex and the other regional phone companies have been waging a high-cost lobbying and advertising campaign to get Congress to pass legislation allowing them to provide services of this type. The Justice Department has supported certain changes but said it will not tolerate violations in the meantime.
O'Brien said that Nynex, after buying Telco in 1986, had asked the Justice Department for clarification of the legality of the computer operation, then discontinued the arrangement with MCI in 1987 as a "good faith" effort to settle concerns that the department had raised over it.
The decree is broadly worded and since its enactment the seven companies have repeatedly sparred about its limits with the Justice Department and federal Judge Harold H. Greene, who oversees the decree from U.S. District Court in the District.
Last year, the Justice Department warned that some activities of the regional companies might overstep the bounds of legitimate interpretation and that criminal action might follow. "A court order is the law," said James F. Rill, assistant attorney general for antitrust, in a prepared statement yesterday, and firms "bound by a decree are not free to deliberately or recklessly disregard that decree."
In an unrelated matter, the Federal Communications Commission in February tentatively decided to fine Nynex $1.4 million and order $35 million in refunds for allegedly overcharging customers. One Nynex subsidiary sold equipment to another at allegedly inflated prices. Nynex has denied wrongdoing in this matter.
Nynex officials said that the indictment would not affect a lawsuit brought by a former employee of Telco, Scott J. Rafferty, who sued Nynex and Telco alleging that he was fired after pointing out decree violations by the subsidiary.
The law under which Nynex was indicted does not establish a maximum penalty.