Verizon Wireless meddled in the business affairs of its largest New York store operator so it could artificially inflate pre-paid phone activations, a lawsuit filed yesterday in Manhattan state court charges.

The cell-phone giant pulled off the alleged scam by working with sub-agents of the retailer to activate inexpensive pre-paid phones for six months — phones that it sometimes would not even give to customers — in order to increase activation numbers, the suit alleges.

The higher activation numbers would boost profits and make Verizon Communications, the parent of the cell-phone provider, appear more profitable than it actually was, the suit charges.

The suit, which seeks to recover more than $1 billion in damages, was filed by ZCom, which runs roughly 120 NYC area stores, 90 of which are subleased. The suit alleges that Verizon Wireless worked the scam with some of those sub-lessors.

State Senate Minority Leader John Sampson, ZCom’s co-counsel, said the the firm was attempting to achieve “steroid enhancing” results.

The subject of falsely activating prepaid phones has been hotly debated among ZCom and its partners. In fact, ZCom sub-lessor Shelly Bhumitra is seeking class-action status for a lawsuit alleging ZCom, working with a Verizon Wireless executive, pressured him to fraudulently activate pre-paid phones.

Bhumitra’s lawyer David Paris, of Paris Ackerman & Schmierer, said ZCom’s suit is a “kitchen-sink kind of pleading” that lacks merit and will likely not be certified as a class.

Twenty-five defendants were named in the suit yesterday including Verizon Wireless CEO Lowell McAdam and former CEO Ivan Seidenberg.

Verizon Wireless spokesman David Samberg declined to comment.

ZCom also is fighting a suit brought by Verizon Wireless, which has terminated ZCom’s license to sell Verizon products effective Jan. 31, claiming that ZCom has engaged in pre-paid fraud.

In a separate lawsuit, Verizon has sued ZCom to enforce its termination and avoid protracted litigation.

(Source: NY Post)