HP to Pay $16.3 Million to Resolve E-Rate Fraud Charges

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Hewlett-Packard will pay US$16.3 million in a settlement of alleged fraud involving a U.S. Federal Communications Commission program to bring Internet access to schools and libraries in poor areas, the FCC and U.S. Department of Justice announced Wednesday.

Whistleblowers told the agencies that contractors working with HP and other companies "lavished" gifts on employees at the Dallas Independent School District and the Houston Independent School District in Texas in an effort to secure E-Rate contracts that included $17 million in HP equipment, the agencies said.

The contractors gave school employees meals and entertainment, including trips on a yacht and tickets to the 2004 Super Bowl, in an effort to get inside information and win contracts that were supposed to be awarded in a competitive bidding process, the agencies said.

An HP spokeswoman wasn't immediately available for comment.

Most of the $16.3 million will be returned to the E-Rate program, the FCC said. The FCC will also oversee a compliance agreement agreed to by HP, the agency said.

"Broadband is key to our children's 21st century education," FCC Chairman Julius Genachowski said in a statement. "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."

Whistleblowers filed two related lawsuits under the U.S. False Claims Act, which permits private parties to sue for false claims on behalf of the U.S. government and share in any recovery. In one case, the DOJ has joined the lawsuit against contractor MSE, its former CEO and a former CTO in the Dallas school district. The DOJ has joined the second lawsuit against contractor ACS.

With the HP settlement, the two whistleblowers in the Dallas case will share more than $1.4 million. The two whistleblowers in the Houston case will share nearly $800,000.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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