A Houston company and a former Columbia, South Carolina, school district official are among the latest to be involved in two separate instances of abusing the eRate, according to the U.S. Department of Justice (DoJ). The eRate is the $2.25 billion-a-year federal program that provides telecommunications discounts to eligible schools and libraries.

Houston-based networking company NextiraOne LLC was sentenced April 20 to pay more than $4.5 million to the U.S. government and American Indian schools in South Dakota. According to DoJ, NextiraOne pleaded guilty to defrauding the eRate and member schools of the Oglala Nation Educational Coalition on the Pine Ridge Reservation, part of the Sioux Tribe.

DoJ said the company was charged with inflating equipment prices, submitting fraudulent invoices for payment, and failing to install and deliver certain equipment and services originally billed to the eRate program.

NextiraOne has agreed to cooperate in an ongoing investigation, the department said, and it has been ordered to pay a $1.9 million criminal fine. In addition, a civil settlement filed April 20 requires the company to forfeit more than $2.6 million in reimbursement for work it has performed at other school districts.

The sentencing took place before U.S. District Judge Lawrence Piersol in Sioux Falls, S.D.

"These fraudulent schemes rob funds used to assist the neediest schools and libraries across the country," said Assistant Attorney General Thomas O. Barnett, who oversees DoJ’s antitrust division.

In a separate instance, DoJ also announced that a federal grand jury in Columbia, S.C., returned a 12-count indictment alleging that a former South Carolina school district official committed mail and wire fraud in a scheme to defraud the eRate. DoJ said the charges stem from allegedly fraudulent applications for eRate funding that former technology director Cynthia K. Ayer submitted on behalf of Bamberg County School District One in Bamberg, S.C.

According to the indictment, from April 1, 1999, until Feb. 1, 2003, Ayer allegedly used her position as the technology director of the school district to award contracts to her company, Go Between Communications, by submitting fraudulent applications for more than $3.5 million in eRate funding to the Federal Communications Commission’s Universal Service Administrative Co. (USAC) without a competitive-bidding process.

The indictment further charges that, as a result of her actions, Ayer fraudulently obtained $468,496 in payments from USAC. The charges in the indictment include 10 counts of mail fraud and two counts of wire fraud.

Including the two April 20 announcements, 11 individuals and 10 companies have been charged as part of the Antitrust Division’s ongoing investigation into fraud and anti-competitive conduct in the eRate program. Six companies and three individuals have pleaded guilty, agreed to plead guilty, or entered civil settlements, DoJ said.

The defendants in these cases have agreed to pay criminal fines and restitution totaling more than $40 million, according to DoJ. Two of the individuals have reportedly been sentenced to serve six years in prison.


U.S. Department of Justice

eRate program

NextiraOne LLC

Bamberg County School District One