The U.S. Federal Communications Commission (FCC) has temporarily barred two companies, including NEC-Business Network Solutions, from receiving funds from a government program that helps schools and libraries in poor areas connect to the Internet.
The FCC has suspended NEC from participating in the E-Rate program for six months and suspended Inter-Tel Technologies for one year. The two companies have pleaded guilty to fraud-related charges related to the E-Rate program, and the U.S. Department of Justice (DOJ) is conducting an ongoing investigation into fraud and waste of E-Rate funds.
The FCC, in a decision dated June 30, also denied an Inter-Tel request to be allowed to continue limited product sales and service to its current E-Rate customers.
In May 2004, NEC pleaded guilty to E-Rate-related charges and agreed to pay $20.6 million in fines and restitution. The company was accused of bid-rigging and wire fraud while providing E-Rate services to the San Francisco Unified School District.
In January 2005, Inter-Tel pled guilty to two crimes, one related to fraudulent and noncompetitive bids, and the second involving submitting inflated invoices in the San Francisco district. It agreed to pay nearly $9 million in fines and restitution.
FCC Commissioner Michael Copps called for both companies to be barred for a longer period. The six-month ban for NEC was a "slap on the wrist," he said in a statement.
"Inter-Tel’s activities were designed to bilk the E-Rate program of millions of dollars," he added. "The commission missed an opportunity here to send a sterner message to other corporations and individuals contemplating similar wrongdoings that such activities will not be tolerated by this agency."
Several members of Congress have advocated cutting or ending the E-Rate program because of reports of fraud and waste. Under the program, funded by a tax on telephone services, schools apply for money for cabling and Internet backbone equipment and for monthly Internet service fees.
In June, Indiana and its Intelenet Commission have agreed to pay nearly $8.3 million in a civil settlement on charges of making false statements and claims to the E-Rate program
Before that settlement, 13 people and 12 companies had been charged as part of theDOJ's ongoing E-Rate investigation. Six companies and three individuals had either pleaded guilty or entered into civil settlements, and the defendants had agreed to pay criminal fines and restitution totaling more than $40 million. Two people have each been sentenced to serve six years in prison.
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