Supplier admits defrauding US schools e-project

US supplier Inter-Tel Technologies has agreed to plead guilty and pay fines totalling $8.7m (£4.5m) on charges of bid rigging and...

US supplier Inter-Tel Technologies has agreed to plead guilty and pay fines totalling $8.7m (£4.5m) on charges of bid rigging and wire fraud in connection with a project to connect US schools and libraries to the internet.

The company, a subsidiary of telco Inter-Tel, was accused of submitting rigged bids to schools in Michigan and California as part of the US government's E-Rate programme.

Inter-Tel was also charged with wire fraud and aiding and abetting by willfully entering into a scheme to defraud the programme by inflating bids, agreeing to submit false and fraudulent documents to hide the planned installation of ineligible items, and submitting false and fraudulent documents. 

Inter-Tel said yesterday that it was pleased to have reached a settlement. The settlement will cost it $9.5m, including uncompensated E-Rate work, accounts receivable forgiveness, and legal fees and other expenses, according to Inter-Tel.

If approved by the court, the negotiated settlement will require the company to pay $1.71m in criminal fines and $7m in restitution and civil settlement.

"While the employees directly involved with the matters in question are no longer associated with Inter-Tel in any form, we take full responsibility for their actions," said Inter-Tel chairman and chief executive Steven Mihaylo. "We have begun to implement and will expand to a more rigorous compliance programme, including review of current and future government contracts. We will not tolerate any conduct that causes anyone to question the integrity of our company."

Fraud and waste in the E-Rate programme, which has an annual budget of $2.25bn, has been the subject of several hearings in the US Congress this year. In May, NEC-Business Network Solutions pleaded guilty to defrauding the programme and agreed to pay $20.6m in fines and restitution. Earlier this year, SBC Communications agreed to return $8.8m to the government after equipment was not installed in Chicago schools.

Grant Gross writes for IDG News Service

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