Two Brothers Plead Guilty in E-Rate Ring
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Two more vendors pleaded guilty Friday to fraud charges related to the country's troubled E-rate program, the $2.25 billion initiative launched in 1997 to help schools and libraries connect to the Internet.
Qasim Bokhari and Haider Bokhari both pleaded guilty to charges of conspiracy, fraud and money laundering involving the federal program. Each faces up to 20 years in prison and deportation. A third Bokhari brother, Raza, is also facing charges but is currently at large as a fugitive.
The two guilty pleas follow the conviction last year of a Fresno, Calif.-based contractor who pleaded guilty to federal bid rigging related to the E-Rate fund. In addition, earlier this year a subsidiary of NEC America agreed to pay $20.6 million to settle criminal charges involving the company's participation in the program, and SBC agreed to pay $8.8 million back to the program for stockpiled switches and equipment.
According to court papers, Qasim Bokhari and his Virginia-based company submitted applications for E-Rate program funding on behalf of 21 schools in the Milwaukee and Chicago areas, totaling more than $16 million. Qasim Bokhari and his brothers eventually received more than $1.2 million for goods and services that were not provided to three of the schools.
In addition, according to the Dept. of Justice (DoJ), the three brothers conspired to conduct numerous financial transactions involving the proceeds of the fraud to conceal and disguise the source of the money. These alleged financial transactions include wiring more than $600,000 to Pakistan, purchasing a residence in Kenosha, Wisc., and acquiring several automobiles.
"The E-Rate Program was designed to assist the children in our nation's neediest schools, and we are committed to pursuing prison terms for those who would corrupt this program for personal gain," R. Hewitt Pate, assistant attorney general in charge of the DoJ's Antitrust Division, said in a statement.
Each of the Bokhari brothers were originally charged in a March 16 indictment filed under seal and unsealed after the arrest of Qasim Bokhari and Haider Bokhari on April 1. At the time of their arrest, citing the risk of flight, the court ordered Qasim Bokhari and Haider Bokhari, both citizens of Pakistan, to be held in prison pending trial.
A superseding indictment also charged all three individuals with money laundering and conspiracy to commit money laundering.
Under the E-Rate program, telecom companies or contractors provide equipment and services to schools and libraries at a discount, and the federal government covers the difference through the E-Rate fund. The cost is ultimately passed on to consumers through their telephone bills. Nearly 90 percent of U.S. schools and libraries receive subsidies from the fund.
The Federal Communications Commission (FCC) maintains oversight authority for the program but contracts out the administration of it to the Universal Service Administrative Company (USAC).
In January of 2003, the Center for Public Integrity, a Washington-based non-profit "public service journalism" organization, issued a report claiming the E-Rate program was "honeycombed" with fraud. The center's study is based on two FCC audit reports and independent interviews.
Subsequent FCC audits have discovered abuses ranging from simple paperwork and reporting errors to false billing and other fraud potentially involving hundreds of millions of dollars.
Congress has also been investigating charges of waste, abuse and fraud in the program.