Houston Co. Fined in E-Rate Fraud Case

NextiraOne, a networking equipment and services vendor, was sentenced Thursday to pay more than US$4.5 million in fines and restitution for defrauding a U.S. government program intended to bring the Internet to schools and libraries in poor areas, the U.S. Department of Justice (DoJ) announced.

The charges against NextiraOne, based in Houston, included defrauding schools at the Pine Ridge Reservation in South Dakota by overbilling for networking equipment funded by the U.S. E-Rate program, the DoJ said. The E-Rate program, administered by the private Universal Service Administrative Co. on behalf of the U.S. Federal Communications Commission, has come under fire in the U.S. Congress in recent years after numerous reports of fraud and abuse.

NextiraOne, a subsidiary of Platinum Equity, defrauded the E-Rate program and the Oglala Nation Educational Coalition member schools by inflating equipment prices, submitting false and fraudulent invoices for payment, and failing to install and deliver certain equipment and services originally billed to the E-Rate program, according to charges filed in U.S. District Court in South Dakota.

NextiraOne cooperated in the investigation, and under a plea agreement has agreed to continue to do so, the DoJ said. NextiraOne will pay a $1.9 million criminal fine, and a civil settlement filed Thursday requires NextiraOne to forfeit more than $2.6 million for uncompensated work previously performed at other school districts.

There was no answer at NextiraOne’s Houston headquarters Friday morning.

Also this week, the DoJ announced an indictment against Cynthia K. Ayer, a former technology director of Bamberg County School District One in South Carolina, on E-Rate-related fraud charges. A South Carolina grand jury on Wednesday charged Ayer with 10 counts of mail fraud and two counts of wire fraud for allegedly funneling E-Rate money to a company she owned.

The E-Rate program, sometimes called the “Gore tax” after E-Rate champion and former U.S. Vice President Al Gore, subsidizes Internet access, telecommunications services and internal communications networks to schools and libraries in poor areas. The program was created by Congress in the Telecommunications Act of 1996, and its $1.9 billion annual budget is funded by telecommunications carriers through the federal Universal Service Fund.

Including Thursday’s charge, 11 people and 10 companies have been charged as part of the DoJ Antitrust Division’s ongoing investigation into fraud and anticompetitive conduct in the E-Rate program. Six companies and three people have either pleaded guilty or have entered civil settlements.

-Grant Gross, IDG News Service

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