November 12, 2010 - 2:34 pm
By Sharon Gillett | Chief, Wireline Competition Bureau

This week the FCC notched another win for America's taxpayers, and especially for America's students. Working with the Department of Justice, and acting on tips from whistleblowers, the FCC investigated allegations that a group of companies that included Hewlett Packard Company (HP) lavished gifts on Houston and Dallas Independent School District personnel to lure contracts that included some $17 million in HP equipment. These improper actions constitute E-rate fraud, threatening the integrity of a crucial educational program, and have resulted in a settlement. Since 1996 the E-rate program has brought Internet connectivity to millions of students and virtually every classroom across the nation.

The charges are as eye-opening as they are disappointing. Yachting trips and pricey meals; tickets to see Tom Brady and the Patriots as Houston hosted the 2004 Super Bowl; and other varied and alluring entertainment packages. These contractors pulled out all the stops. All to sway officials to skirt a competitive bidding process that is vital to ensure that government funds provided to schools and libraries for our kids' education stretch as far as possible.

In the settlement ironed out between the Department of Justice, FCC and HP, HP agreed to pay the government $16.25 million, most of which will be returned to the E-rate program. Further, the FCC will oversee a compliance agreement to prevent future foul play. HP will undergo audits of its E-rate business and has agreed to train its employees thoroughly on FCC gift and E-rate rules.

Collaborating with other agencies and alert citizens, we're keeping our eyes open for instances of waste, fraud and abuse in the E-rate program. Just this September we took more steps toward ensuring a fair and competitive bidding process. These steps include more specific E-Rate Program gift rules that send a clear message that conduct like that found in the Dallas and Houston cases will not be tolerated. We'll do all we can to ensure that E-rate funds continue to increase educational opportunities and are not misused. As Chairman Genachowski noted in the press release issued earlier this week, E-rate resources should "work to benefit schools and libraries." We'll continue to hold the line.

Visit the Department of Justice to learn more about the settlement.