HP Settles E-Rate Fraud Charges For $16 Million


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Hewlett-Packard has agreed to pay the government $16.25 million to settle e-rate fraud charges.

The E-rate program, which funds Internet connections in schools and libraries, has brought Internet connectivity to virtually every classroom in the country.

The Department of Justice and the Federal Communications Commission, acting on tips from whistleblowers, said contractors working with HP and other companies lavished gifts on Dallas Independent School District and Houston Independent School District officials in order to get contracts that included $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 thoroughlyon the FCC's gift and other E-Rate rules, and provides for audits of HP's E-Rate business," saidAustin 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."