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Indiana Pays Up For E-Rate Fraud

Add the state of Indiana to the growing list of E-Rate fraudsters.

Earlier this week, Indiana agreed to pay nearly $8.3 million to the U.S. government as part of a civil settlement involving the state's now-defunct Intelenet Commission, which handled E-rate payments.

The E-Rate program provides funding for needy schools and libraries to connect to and use the Internet. Under the program, which is funded by telephone users, schools apply for financial help in cabling, Internet backbone equipment and monthly connection fees.

Federal investigators alleged Intelenet violated the E-Rate program rules in a number of ways.

Among the charges were claims of inflated prices, falsified invoices and non-competitive bid practices. The charges also included ignoring an E-Rate requirement that schools and libraries make co-payments for expenses charged to the E-Rate program.

"The E-Rate program makes federally mandated funds available to the poorest schools in the nation for Internet access and wiring," Peter D. Keisler, assistant attorney general for the Civil Division of the Department of Justice (DoJ), said in a statement. "False claims to this very important federal program will not be tolerated."

The DoJ said Indiana had cooperated with the investigation. The Intelenet Commission has been disbanded and replaced with a new Office of Technology.

Since its inception as part of the 1996 Telecommunications Act, allegations of fraud and corruption have plagued E-Rate.

In addition to the DoJ investigation, both the Federal Communications Commission, which oversees the fund, and the House Energy and Commerce Committee, have launched their own probes.

To date, 11 individuals and 10 companies have been charged as part of the DoJ's own ongoing investigation into fraud and anti-competitive conduct in the program.

Six companies and three individuals have either pleaded guilty or have entered civil settlements for their roles in defrauding the E-Rate fund. Those defendants have agreed to pay criminal fines and restitution totaling more than $40 million.

Two of the individuals have been sentenced to serve six years in prison.

In January 2003, the Center for Public Integrity, a Washington-based public service journalism organization, issued a report claiming the program was "honeycombed" with fraud.