NEC Pleads Guilty to Cheating Schools

NEC-Business Network Solutions, a unit of NEC America, will plead guilty to defrauding a U.S. government program to help needy schools use the Internet.

Under a plea agreement, the company will pay $20.6 million in fines, civil settlements, and restitution, the Department of Justice has announced. Judge Charles Breyer of the U.S. District Court for the Northern District of California is scheduled to hear the guilty plea and rule on the plea agreement Thursday afternoon, said Assistant U.S. Attorney Matthew Jacobs.

Five-State Fraud

NEC/BNS was charged with collusion and wire fraud in the U.S. Federal Communications Commission's E-Rate program, which uses money from telecommunications user fees to fund Internet use by schools. Under the program, schools apply for funds to cover cabling, Internet equipment, and monthly connectivity fees.

The company is charged with allocating contracts and rigging bids in violation of the Sherman Antitrust Act at school districts in Michigan, Wisconsin, Arkansas, and South Carolina, according to the DOJ.

It also has been charged with wire fraud in connection with a scheme to defraud E-Rate and the San Francisco Unified School District. In the San Francisco case, NEC/BNS inflated bids, agreed to submit false and fraudulent documents to hide plans to install ineligible items, and agreed to donate "free" items for which it planned to bill E-Rate, according to the DOJ's statement. The company also filed false and fraudulent documents to cut off inquiry into the legitimacy of the funding request, the DOJ said. Under the plea agreement, NEC/BNS would pay a $4.7 million fine for those crimes.

Making Restitution

The company also entered into a civil settlement on Thursday to provide restitution for the harm caused by its crimes. It will pay $10.3 million in cash and provide $5.6 million in goods and services to designated school districts as a condition of a three-year probation, the DOJ said.

NEC/BNS is cooperating in an ongoing government investigation, according to the statement.

"When we realized we had an issue here, we cooperated with them, we investigated ourselves, and we have taken all the appropriate actions to make sure this can't happen again," said Tom Burger, president and chief executive officer of NEC Unified Solutions and NEC/BNS.