AT&T has agreed not to charge California customers for calls made after their phones are stolen or lost.

The agreement, announced Wednesday, is part of a settlement brokered by Attorney General Jerry Brown on behalf of the state's cell phone customers.

"This groundbreaking settlement makes AT&T the first cell phone company that has agreed to protect its customers from cell phone rip-offs and other unauthorized uses," Brown said in a prepared statement. "It is now time for the rest of the cell phone industry to step forward and follow AT&T's example."

The investigation began last year after customers complained that they had been charged thousands of dollars for calls made after their phones were stolen. In one case, the calls originated in Mexico although the customer had never been there. AT&T refused to credit customers, even though they fully documented that the calls were unauthorized, Brown said.

Brown alleged that the company violated California Public Utilities Code section 2890, which prohibits phone companies from charging customers for unauthorized services.

AT&T has repeatedly denied any wrongdoing. Representatives with the national telecom could not be reached immediately for comment on the settlement.

A San Francisco Superior Court judgment, filed Wednesday, requires the company to credit customers or immediately investigate reports that calls were made after a phone was lost or stolen. The company can only charge a customer if an investigation determines that the customer actually authorized the charges.

AT&T (formally Cingular) must inform each customer of their legal rights regarding lost or stolen phones -- in writing -- and must either credit disputed charges or inform customers of their legal rights which are included, under the agreement. AT&T must help customers obtain credit for amounts already paid on lost or stolen phones, since 2003, Brown said in a prepared statement.

Customers have the right to have complaints of theft investigated within 30 days, the right to provide information showing that they did not authorize the calls and the right not to pay for calls that are in dispute during an investigation. Finally, they have the right to appeal the outcome of an investigation to the California Public Utilities Commission.

AT&T is expected to also pay the Attorney General's Office $500,000 for costs of the state investigation and for the Unfair Competition Law Fund, administered by the California District Attorneys Association.