Electrical contractor to pay $3.3 million for E-Rate fraud

Contractor pleads guilty to rigging bids on a program designed to help schools and libraries in poor areas connect to the Internet

An electrical contractor based in Fresno, California, has pleaded guilty and agree to pay US$3.3 million in fines and restitution for rigging bids on a US government program designed to help schools and libraries in poor areas connect to the Internet, the US Department of Justice said.

Howe Electric pleaded guilty Wednesday in US District Court for the Northern District of California, San Francisco Division, to charges that the company engaged in two conspiracies to rig bids to two Fresno-area schools, the DOJ said. The bids were part of the E-Rate program, operated by the US Federal Communications Commission, which allows schools and libraries to receive money for cabling, Internet backbone equipment and monthly Internet and telephone service fees.

Howe Electric obtained agreements from potential competitors not to compete on the bids in return for Howe's agreement to use those competitors as subcontractors on the school projects, the DOJ said.

The conspiracies began in 1998 and 1999 and continued into 2001, the DOJ said. Howe Electric entered into agreements with former education consultant Judy N. Green in which Howe was awarded contracts for the E-Rate projects at the West Fresno Elementary School District and the W.E.B. DuBois Charter School in exchange for awarding subcontracts to other vendors, the DOJ said.

The other vendors had the capability to bid against Howe Electric on the projects but had agreed with Green not to compete in exchange for the award of the subcontracts, the DOJ said. After completion of the projects, Howe Electric requested and received reimbursement from the E-Rate program for the work that it and the subcontractor vendors performed at the schools.

Green was convicted and sentenced in March to serve seven and a half years in prison for her role in the E-Rate conspiracies.

Howe Electric will pay US$300,000 in criminal fines and $3 million in restitution and civil settlements. It's plea agreement is subject to court approval.

Howe Electric was charged with violating the Sherman Act, covering antitrust violations, which can carry a fine of US$10 million for companies with violations occurring before June 22, 2004.

The DOJ's Antitrust Division is conducting a continuing investigation into fraud and anticompetitive conduct in the E-Rate program. Seven companies and 16 individuals have pleaded guilty, have been convicted and found guilty, or entered civil settlements, resulting in more than US$40 million in criminal fines and restitution and jail sentences of nearly 29 years.

Trials are currently pending in three additional E-Rate cases, and one defendant remains an international fugitive.

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