The federal government’s ongoing probe into E-Rate fraud nabbed another
conviction Wednesday with the guilty plea of California-based Premio, which
agreed to $400,000 in criminal fines and $1.3 million in restitution as part
of the civil settlement.
Premio, which makes and sells computers, servers, software and other
computer equipment, admitted to collusion, bid-rigging and mail fraud.
Under the $2.25 billion E-Rate program, telecom companies or contractors
provide eligible equipment and Internet services to schools and libraries at
a discount.
The federal government covers the difference through the E-Rate
fund, which is a part of the Universal Service Fund (USF).
Premio was charged with willfully entering into a scheme to defraud the
E-Rate program at a school district in Highland Park, Mich.
According to the Department of Justice (DoJ), Premio substituted ineligible
equipment for approved equipment, submitted false and fraudulent documents
to hide the fact that it installed ineligible equipment and submitted false
invoices to the E-Rate program to receive payment for the ineligible
equipment.
“This fraudulent conduct caused the E-Rate program to pay for unnecessary
and inappropriate items and, as a result, prevented the program from funding
projects at needy schools that should have received funding,” Thomas O.
Barnett, acting assistant attorney general in charge of the DoJ’s Antitrust
Division, said in a statement.
Ten individuals and eight companies have already been charged as part of the
Antitrust Division’s ongoing investigation into fraud and anti-competitive
conduct in the E-rate program.
Two companies and three individuals have pleaded guilty and agreed to pay
criminal fines and restitution totaling $30.69 million. Two of the
individuals have each been sentenced to serve six years in prison.
The E-Rate subsidy was added to telephone bills in 1997 under the Clinton
administration and has often been dubbed the “Gore tax” for former Vice
President Al Gore’s enthusiastic support.
Since 2004, the U.S. House of Representatives has held numerous hearings
examining E-Rate waste, fraud and abuse. In addition, the Federal
Communications Commission (FCC), which administers the program,
is conducting its own investigation.
Last March, the General Accountability Office (GAO) concluded in a report that the E-Rate program is plagued by mismanagement, waste, fraud and
abuse.
Several months later, a report by the
House Oversight and Investigations Subcommittee, said the E-Rate program,
though having good intentions, is poorly managed by the FCC.
The report said that weak competition requirements and poor oversight by the
FCC opened the door for unscrupulous vendors to “completely manipulate” the
competitive process for the E-Rate program and goods.
In one of the cited stories of E-Rate abuse, the government disbursed more
than $100 million from 1998 to 2001 to equip Puerto Rico’s 1,540 schools with
high-speed Internet services and equipment.
A later review found very few computers actually connected to the Internet
and $23 million in equipment sitting in opened boxes.
