AT&T Missouri to pay $1.4 million settlement

updated 4:33 p.m. ET Oct. 13, 2009

KANSAS CITY, Mo. - AT&T Missouri has agreed to pay $1.4 million to settle a federal lawsuit alleging it violated the rules to receive school Internet contracts.

The Justice Department announced the settlement Tuesday. It has claimed the company, formerly known as Southwestern Bell Telephone, colluded with officials at the Kansas City school district to get contracts through the federal E-Rate Program.

The E-Rate Program provides money to poor schools and libraries for hardware and Internet connection fees. The money comes from fees on telephone bills.

Federal authorities got involved in the case in 2006 after American Fiber Systems Inc., an unsuccessful bidder for the project, filed suit. American Fiber is set to receive $195,000 from the settlement.

The school district has already settled the case.

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