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DynCorp Files $100 Mln Lawsuit Against GTE Over Sale

By David Glovin

New York, Aug. 10 (Bloomberg) -- DynCorp Inc. sued GTE Corp., alleging it was cheated in a $165 million sale of a telephone system for prisoners by the unit of Verizon Communications Inc.

In the lawsuit filed today in federal court in New York, closely held information technology company DynCorp says GTE gave it false information about the telephone system during 1999 negotiations. Bell Atlantic bought GTE in 2000 to create Verizon.

DynCorp, based in Reston, Virginia, is seeking at least $100 million in damages.

@@GTE failed to tell the truth about problems being experienced and the losses being incurred,'' the complaint says.

Sharon Cohen-Hagar, spokeswoman for New York-based Verizon, the largest U.S. local telephone company, said the company hadn't seen the suit and declined to comment.

The phone system at issue provides debit and collect calls for inmates at federal prisons. Under a 1998 contract with the federal government, GTE was to be paid by collecting a percentage of telephone call revenue, especially on collect calls.

GTE in 1999 misrepresented the system's profitability, the suit says. DynCorp says GTE didn't reveal that call volume was lower than estimated and that prisoners were placing fewer collect calls than expected. Also, DynCorp says the system didn't work properly.

@@It was plagued with problems,'' the suit says. GTE portrayed the system as a @@highly successful and profitable business enterprise whose profit margins were healthy and poised for exceptional future growth,'' the suit says.

The defendants are also alleged to have withheld documents from DynCorp.

Shares in Verizon, the second-largest U.S. telecommunications carrier behind AT&T Corp., rose $1.18 to $53.93.