DOJ Nets Two More Guilty Pleas in E-Rate Fraud Charges

Former co-owners of DeltaNet, a New Jersey computer service provider, have agreed to plead guilty to charges related to defrauding a government program designed to help schools and libraries in poor areas connect to the Internet, the U.S. Department of Justice announced.

The DOJ filed conspiracy charges Wednesday in U.S. District Court for the District of Kansas in Kansas City against Benjamin Rowner and Jay H. Soled, former owners of DeltaNet, for their role in defrauding the E-Rate program, the DOJ said. The pair conspired to defraud the E-Rate program by submitting false statements and keeping important information from the Universal Service Administrative Co., which administers the E-Rate Program for the U.S. Federal Communications Commission, the DOJ said.

Rowner and Soled participated in the conspiracy between 1999 and 2003, and the fraud affected schools from California to New York, the DOJ said. With their plea agreement, pending a judge's approval, the men agreed to cooperate with the DOJ's ongoing investigation into E-Rate fraud.

The conspiracy charges each carry a maximum penalty of five years in prison and a US$250,000 fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either amount is greater than the statutory maximum fine, the DOJ said.

"Our investment in this investigation is paying off," Kent Nilsson, the FCC's inspector general, said in a statement. "Every unlawful dollar obtained by individuals and companies deprives impoverished schools of much-needed funding, and we, along with the DOJ and FBI, will continue to aggressively pursue those who would steal from the E-Rate fund."

E-Rate, a program begun with the Telecommunications Act of 1996, provides funding to school districts and libraries in poor areas. Schools can receive money for cable, Internet backbone equipment and for monthly Internet and telephone service fees.

Rowner and Soled are the latest in a long line of defendants who have faced fraud or other charges related to the E-Rate program in recent years. The DOJ Antitrust Division's ongoing investigation has resulted in six companies and 12 people either pleading guilty, being convicted or entering into civil settlements. Defendants have been sentenced or agreed to pay more than $40 million in fines and restitution.

Trials are pending in three E-Rate cases, and one defendant is a fugitive.