There is, but you may not like the answer. The $800 deposit is an automatic if you have an account closed owing ATT or any of the companies that it purchased or previous name (such as Cingular, ATT Wireless, Southwestern Bell Mobile systems, Bell South, etc.)There are 3 ways to reduce the deposit (and there are still no guarantees that there will not be a deposit). The first is to get hold of ATT collections. Odds are, after 4 years, that your debt had been turned over to a collecton agency. ATT Collections should be able to get you the information on the agency. Very often the collection agencies will settle with you for a lower amount than you actually owe. Once setted with the Collection agency, be sure that they report the payment to ATT...
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Well besides what PhonemanJ said, I've only seen one cus in a very rare instance get his deposit waived as a courtsey but when he cancelled service for buyer's remorse and tried for AT&T again, he had that deposit to pay.

And also, why didn't you go after the friend for the balance?