Federal authorities on Dec. 18 charged the owner of Connect2 Internet Networks Inc., a New York-based internet services company, and three employees with allegedly defrauding the eRate of millions of dollars.

eSchool News first broke the story on Nov. 8 that Connect2 might be one of several companies under investigation by the Schools and Libraries Division (SLD) of the Universal Service Administrative Co., the agency that administers the eRate, for possible violations of the program's rules. (See "New eRate tool IDs questionable vendors," http://www.eschoolnews.com/news/showStory.cfm?ArticleID=4072.)

The case marks the first time criminal charges have been filed against anyone for abusing the $2.25 billion-a-year federal program, which provides discounts to schools and libraries of between 20 percent and 90 percent of the cost of telecommunications services, internet access, and internal wiring.

Prosecutors allege that company owner John Angelides and employees John Dotson and Gary Blum faked paperwork and other documents to bring computers and other equipment to four New York area schools.

Under the rules of the eRate, schools must pay at least 10 percent of the cost of equipment purchased. The men initially promised the schools they would pay nothing to take advantage of the program, court documents say, but then the men asked school officials to make bogus payments—usually for tens of thousands of dollars—to make it appear as if the schools had paid their share. The money allegedly was funneled back to the schools.

Lawyers for the three men declined to comment on the charges. A fourth suspect, identified in a Dec. 19 New York Times report as Oscar Alvarez, was expected to surrender to authorities soon.

The charges against the men include conspiracy to commit wire fraud, making false claims on government programs, making false statements, and obstruction of justice.

SLD officials were not immediately available for comment.

Links:

Connect2 Internet Networks Inc.
http://www.edu-net.com/index.html

Schools and Libraries Division
http://www.sl.universalservice.org