NEW YORK (CNN/Money) - MCI agreed to pay the federal government $27 million to settle claims it defrauded the General Services Administration since 1999, according to the Justice Department.

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The agreement, approved by the bankruptcy court late Tuesday, resolves allegations that the telecom provider then known as WorldCom passed to the government costs and fees in excess of what was allowed under a 2001 contract. WorldCom emerged from bankruptcy court protections in April.

The allegation arose from a lawsuit filed by telecommunications specialist John Russo under the whistleblower provisions of the federal law. That law allows private individuals to sue on behalf of the federal government. The settlement was reached in negotiations between the company, the U.S. attorney for the central district of California and the civil division of the Department of Justice.

In addition to the $27 million fine, MCI will give the GSA a $670,000 credit.