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HP TO PAY $16.25 MILLION TO SETTLE DOJ-FCC E-RATE FRAUD INVESTIGATION

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Released: November 12, 2010

NEWS
Federal Communications Commission

News Media Information 202 / 418-0500

445 12th Street, S.W.

Internet: http://www.fcc.gov

Washington, D. C. 20554

TTY: 1-888-835-5322

This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action.
See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

FOR IMMEDIATE RELEASE:
NEWS MEDIA CONTACT:
November 10, 2010
Mark Wigfield, 202-418-0253
Email: mark.wigfield@fcc.gov

HP TO PAY $16.25 MILLION TO SETTLE DOJ-FCC E-RATE FRAUD

INVESTIGATION

Washington, D.C. -- The Department of Justice today announced a civil settlement with Hewlett-
Packard Company (HP) for alleged E-rate fraud, following an extensive investigation by the
Federal Communications Commission and DOJ. The E-rate program, which funds Internet
connections in schools and libraries, has brought Internet connectivity to virtually every
classroom in the country.
Acting on tips from whistleblowers, the FCC and the DOJ investigated allegations that
contractors working with HP and other companies lavished gifts on Dallas Independent School
District and Houston Independent School District personnel in order to get contracts that
included some $17 million in HP equipment. Meals and entertainment -- including trips on a
yacht and tickets to the 2004 Super Bowl -- were provided by the contractors to get inside
information and win contracts that were supposed to be awarded through a competitive bidding
process.
"Broadband is key to our children's 21st century education," said FCC Chairman Julius
Genachowski. "That's why one of the FCC's top priorities is making sure E-rate works to
benefit students and libraries. Today's settlement shows the extensive efforts of the FCC and
DOJ to protect the E-rate program from waste, fraud, and abuse, and to deter misconduct in the
future."
As part of the settlement, HP has agreed to pay the government $16.25 million, most of which
will be returned to the E-rate program. In addition, the FCC has negotiated and will oversee a
compliance agreement with HP that will ensure that the company plays by the rules in the future.
"The FCC's compliance agreement with HP ensures that HP will train its employees thoroughly
on the FCC's gift and other E-Rate rules, and provides for audits of HP's E-Rate business," said
Austin Schlick, General Counsel of the FCC. "If HP fails to monitor its E-Rate activities closely
and abide by E-Rate Program requirements, it will face substantial penalties."
The FCC has already taken steps to guard against misconduct of this nature. In September the
FCC adopted an Order that bolsters and clarifies the agency's prohibition against E-rate
applicants soliciting or receiving gifts, and against service providers offering or providing gifts.
The FCC also codified additional rules to ensure a fair and competitive bidding process.

"We continue to be vigilant in our management and oversight to prevent any activities that
undermine the integrity of the E-rate program" said Sharon Gillett, Chief of the FCC's Wireline
Bureau. "The FCC will do all it can to ensure that E-rate funds are not diverted from their
purpose of increasing educational opportunities."
For more on the settlement, visit http://www.justice.gov/.
-FCC-
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