Two Brothers Plead Guilty in E-Rate Ring

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

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.

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