More E-rate Fraud Uncovered
Message Posted June 1, 2004
In the past week, there have been two high profile cases of E-rate fraud
reported, for which you should be aware -- Atlanta Public Schools and NEC
(details listed below). I bring these to your attention for three reasons.
1) When you receive calls from the SLD's PIA or invoicing staff asking for
copies of contracts, invoices, RFPs, etc, keep in mind that those questions
have been put in place as a result of the fraudulent acts of other service
providers and applicants. There is no sign of the scrutiny of applications
easing in the near future. To the contrary, the SLD is under more pressure
than ever before to make sure that no funding is committed or disbursed in
error.
2) Please be mindful when procuring E-rate eligible services that if a deal
sounds too good to be true, it is. Conduct a fair and open competitive
bidding process, keep detailed records, seek competition, and don't pay
inflated prices simply because E-rate will be covering a large percentage of
the bill. Technology planning, open and fair competitive bidding, and cost
reasonableness are the bedrock principles of the E-rate program moving
forward.
2) Although the US House Energy and Commerce Committee's Subcommittee on
Oversight and Investigation, chaired by Congressman Jim Greenwood of PA, has
been investigating waste, fraud and mismanagement in the E-rate program over
the past year, there has now been a hearing scheduled for June 9. We expect
this to be the first of several hearings, and also expect calls of major
reforms to the program. I'll let you know more as details become available.
ATLANTA PUBLIC SCHOOLS
The first report of fraud involves an extensive, well researched and
documented set of 5 articles published in the Atlanta Journal-Constitution
exposing that the Atlanta Public Schools had “misspent or mismanaged nearly
$73 million” of E-rate funds while building “one of the country’s most
lavish computer networks” during the program’s first four years. The
articles also pointed to uninstalled equipment, the filing of improper
invoices, excessively expensive networks installed in individual schools,
and contracts with a certain vendor that “routinely charges rates several
times higher than market price."
Links to the individual articles (worth reading when you have the time) are
available on E-rate Central's website at: www.e-ratecentral.com. A good
summary of the articles' findings is available in the latest issue of
eSchoolNews at:
http://www.eschoolnews.com/news/showStoryts.cfm?ArticleID=5072.
NEC
The second report of fraud came from the US Justice Department which charged
NEC (NEC-Business Network Solutions Inc. (NEC/BNS), based in Irving, Texas)
with allocating contracts and rigging bids for E-Rate projects at five
different school districts in Michigan, Wisconsin, Arkansas, and South
Carolina, in violation of the Sherman Antitrust Act. NEC/BNS is also charged
with wire fraud by entering into a scheme to defraud the E-Rate program and
the San Francisco Unified School District by inflating bids, agreeing to
submit false and fraudulent documents to hide the fact that it planned on
installing ineligible items, agreeing to donate “free” items that it planned
to bill E-Rate for, and submitting false and fraudulent documents to defeat
inquiry into the legitimacy of the funding request. NEC has agreed to plead
guilty and to pay a total $20.6 million criminal fine, civil settlement and
restitution. Others involved will be serving jail time. A full article of
the NEC scandal is available at:
http://www.nytimes.com/2004/05/28/technology/28net.html?ex=1086747872&ei=1&en=af6a5b2bd7ce8a6f.
Julie Tritt Schell
jtschell@comcast.net
(717) 730.7133 (voice)
(717) 730.9060 (fax)
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