A former senior employee of a Fresno, Calif., electrical contracting company pleaded guilty Aug. 26 to participating in a bid-rigging scheme involving an eRate project with a California elementary school district.
Duane Maynard, 31, of Arvada, Colo., admitted in U.S. District Court in Fresno that beginning in February 1999, he and several unnamed co-conspirators worked together to ensure that his employer would be the successful bidder on the West Fresno Elementary School District’s eRate project, which sought to wire the district’s two elementary schools to the internet.
According to court papers, they also agreed that no other co-conspirator would submit a competing bid, that co-conspirator companies would serve as subcontractors on the project, and that any competing general bid would be stricken as non-responsive.
In agreeing to and carrying out the scheme, Maynard said he acted on behalf of his employer, which the Fresno Bee identified as Howe Electric Inc.
A lawyer for Howe Electric declined to comment, and the district did not return an eSchool News reporter’s telephone calls before press time.
Maynard is the fourth person to plead guilty to criminal charges associated with eRate fraud and the first to be charged by the U.S. Justice Department’s Antitrust Division. His company is the second firm to be implicated so far in any eRate-related criminal acts.
“The Antitrust Division will vigorously prosecute those who conspire to circumvent the competition requirements of federal programs,” R. Hewitt Pate, assistant attorney general in charge of antitrust matters, said in a statement. “Bid-rigging schemes aimed at the eRate program rob funds for economically disadvantaged schools and libraries across the nation.”
Under a plea agreement, Maynard has agreed to help the federal government in its ongoing investigation of eRate fraud and abuse.
Maynard’s co-conspirators were not named in the court documents, but his plea agreement implies that at least one person from the school district was in on the scheme. Maynard told the court that on Feb. 18, 1999, he attended a “pre-bid” meeting at the district on behalf of his employer.
According to the Bee, the superintendent at the time of the meeting was Joe Lee. Lee was convicted last year of grand theft for double-billing nearly $2,000 in travel expenses during his tenure with the district, the newspaper reported.
Records obtained by eSchool News from the Schools and Libraries Division (SLD) of the Universal Service Administrative Co., which administers the eRate, show that Howe Electric received $2.8 million in eRate funds in 1999 and $1 million the following year for services delivered to the West Fresno Elementary School District.
A second company, Rocky Mountain Internet Inc., received $179,249 for work performed in 1999 but did not receive any funds in 2000, although $140,486 in funding had been approved by the SLD.
Earlier this year, John Angelides, owner of Connect2 Internet Networks Inc. of New York, pleaded guilty to one count of conspiracy for giving schools free passes on their 10-percent shares of the cost of eRate-approved services and faking checks and invoices from the schools so his company could collect its 90-percent share from the federal government.
Charges of conspiracy against two other Connect2 employees were dropped in exchange for lesser pleas.
Federal authorities have stepped up their inquiries into possible eRate fraud since last fall, after a report from the Federal Communications Commission’s Office of Inspector General asked Congress for an extra $2 million to help auditors keep a closer eye on the program.
In his report, the inspector general said that because of a lack of funding to watch over the program, he was unable to give “any level of assurance that the program is protected from fraud, waste, and abuse.”
Since the report came out, the FCC and SLD have taken steps to tighten the program’s oversight, including the appointment of a 14-member panel to recommend improvements.
In addition to pleading guilty to bid-rigging, Maynard also admitted that he lied about remembering the events related to the West Fresno Elementary School District’s eRate project when testifying before a grand jury investigating the matter last December.
Maynard faces three years’ imprisonment and a $350,000 fine, although the penalty may be lessened because he pleaded guilty and agreed to cooperate with the government.
No date was set for his sentencing, the Bee reported, and he is free on his own recognizance. InsteadSee this related link:, U.S. Justice Department Antitrust Division prosecutor Matthew D. Segal asked the judge to hold a status conference in the case Feb. 9.
See this related link:
U.S. Department of Justice: Antitrust Division