How deep is the dirt surrounding school technology purchasing, and how far spread? Those are questions that no one seems yet able–or willing–to answer. But a parade of federal investigations is making the effort, especially when it comes to troubles with the eRate.
In recent years, the eRate–the $2.25 billion-a-year federal program that since 1998 has subsidized the purchase of technology equipment and services in economically disadvantaged schools and libraries–has come under intense scrutiny and sharp criticism. Several reports have found fault with the program, which is managed by the Federal Communications Commission (FCC) and administered by the nonprofit Universal Service Administrative Co. (USAC)–including reports by the FCC’s Office of the Inspector General, the Government Accountability Office (GAO), the Center for Public Integrity, and a subcommittee of the U.S. House of Representatives’ Committee on Energy and Commerce.
All have pointed to gross problems with the eRate that leave it open to unscrupulous activity as well as error. The latest, issued in October by the Energy and Commerce Committee, described the eRate as “a well-intentioned program that nonetheless is extremely vulnerable to waste, fraud, and abuse, is poorly managed by the FCC, and completely lacks tangible measures of either effectiveness or impact.”
Such reports helped prompt a telecommunications bill this summer that, among other things, directs the FCC to improve the eRate program by establishing more oversight and a better means of evaluating how efficiently and effectively districts spend their eRate funds. The bill also calls for penalties for applicants and vendors who repeatedly and intentionally violate rules; USAC already has taken steps on this front by setting up a system whereby program violators may be barred from participating.
Groups such as the Consortium for School Networking (CoSN) are among those that have pushed for penalties that kick in before the point of legal action. “We are egregiously upset by firms or school officials who have tried to defraud very scare public resources and believe they should be pursued aggressively,” said Keith Krueger, CEO of the Washington, D.C.-based group, which has both school district and corporate members. “Those who are, in fact, found guilty should be permanently banned forever from participating in the eRate and, for lesser offenses, people should be prohibited from participating for a certain number of years.”
Amid the backdrop of reform talk, however, investigations march on. The U.S. Department of Justice, together with the FCC and the Federal Bureau of Investigation, has focused for several years on rooting out eRate wrongdoing. So far, according to the Justice Department’s tally, 13 individuals and 12 companies have been charged in its investigations into eRate abuse. Of those, three individuals and six companies have either pleaded guilty to charges or entered into civil settlements. Two people have each been sentenced to serve six years in prison.
Officials with the Justice Department’s antitrust division described the division’s scrutiny of eRate abuse as “midstream.” And while officials wouldn’t comment on open investigations, they said four out of seven of its antitrust field offices currently are investigating cases pertaining to the eRate–Cleveland, Chicago, Atlanta, and San Francisco–and that the pursuit of such cases is at the top of the agenda.
“The criminal antitrust violations of the kind we’re prosecuting in the eRate are the highest priority of the antitrust division,” said Phillip Warren, chief of the San Francisco antitrust field office.
Those cases, Warren said, are found mostly in smaller districts and allege wrongdoing far more often on the part of technology vendors or consultants rather than school district officials. In general, Warren said, investigations have shown patterns of behavior in which technology vendors or consultants take control of the bidding process.
“They’ve seized control and reached agreements that have eliminated competitive bidding, which is an important safeguard built into the [eRate] system,” he said. “We’ve also seen vendors and consultants submitting false and misleading information to USAC–information that, had it been correctly represented, would have led to denial or significantly reduced funds for the project. We’ve seen situations where equipment that should not have been covered by eRate funds was covered and where USAC was deceived as to whether school districts had the co-pay [funds] to pay for equipment and services.”
The largest case filed so far is set to go to trial in January. It charges six corporations and five individuals (none of whom are school district employees) with fraud, collusion, aiding and abetting, and conspiracy in connection with eRate projects in seven states–Arkansas, California, Michigan, New York, Pennsylvania, South Carolina, and Wisconsin. The case alleges a conspiracy that touched 23 school districts, the largest of which is the 60,000-pupil San Francisco Unified School District.
“This alleged nationwide fraud scheme deprived underprivileged schools [of] a valuable internet access program and much needed funding,” U.S. Attorney Kevin V. Ryan, said in a press release announcing the indictments. “This indictment sends a strong signal that defrauding federal programs and thereby jeopardizing future funding opportunities for schools will lead to criminal charges.”
Two investigations involving school administrators did lead to charges and indictments this past spring–one in Michigan and one in South Carolina. A former assistant superintendent of the Ecorse (Mich.) Public Schools was arrested in May on various charges of fraud in an alleged scheme to obtain nearly $7.3 million from the Ecorse schools and the eRate program. According to the Justice Department, Douglas A. Benit, along with his wife Mary Ann Elam Benit, allegedly tried to steer the Ecorse district’s technology contracts to a technology company that Douglas Benit controlled while working for the district. The charges involve alleged activity between 1998 and 2003
In the South Carolina case, Cynthia Ayer, the former technology director of the Bamberg District I schools, was indicted in April on charges she defrauded the eRate program between 1999 and 2003. According to the Justice Department, the indictment says Ayer used her former position within the district to award technology contracts to her own technology company without doing any competitive bids. The charges allege Ayer submitted fraudulent applications for more than $3.5 million to the eRate program and, as a result, obtained more than $468,000 in payments.
Justice officials, as well as USAC officials, declined to comment about the specific whereabouts of other cases still under investigation, but press reports and the House Energy and Commerce report have outlined troubles and inquiries in school systems such as Chicago and Atlanta that, among other things, allege improper stockpiling of millions of dollars worth of equipment purchased with eRate funds. Other stories to hit the news don’t necessarily involve eRate funding but do involve, at the very least, questions of conflict-of-interest and impropriety.
A sampling of what’s been reported in the local press in recent months:
The Philadelphia story about the trip to South Africa and the subsequent software contract has led city officials to call for the district’s inspector general to investigate the case (see main story). One of the school administrators involved, Rosalind Chivis, told the Philadelphia Inquirer she didn’t know PLATO was subsidizing the trip, which was organized by the National Association of Black School Educators; the other, Gregory Thornton, told the paper he knew about PLATO’s role but didn’t see the need to remove himself from involvement in the software contract at the time. Neither official listed the trip on financial disclosure forms. Philadelphia Schools Chief Executive Officer Paul Vallas told the Inquirer, “I don’t need a lawyer to tell me this is a violation of ethics policy. These two individuals stumbled.” Vallas is now calling for annual ethics training for administrators and required disclosure and approval of trips, among other measures.
In May, according to the Washington Post, a grand jury heard testimony into the findings of an independent ethics report concerning the conduct of former Prince George’s County, Md., superintendent Andre Hornsby. According to the Post, the investigation–which has also involved the FBI–alleges that Hornsby used $1 million in district funds to purchase software from LeapFrog SchoolHouse, a company that employed his live-in girlfriend as a saleswoman. Hornsby, who has denied any wrongdoing and has not been charged with a crime, has said the purchase had nothing to do with his girlfriend and that, to his knowledge, she did not benefit from it. Hornsby resigned his position in June 2005.
According to the Dallas Morning News, the FBI and the FCC are investigating a situation in which Ruben Bohuchot, the Dallas Independent School District’s former associate superintendent for technology services, repeatedly used a yacht owned by executives of Micro System Enterprises, a Houston-based company that has been listed as the major recipient of $369 million in eRate funding the district has applied for since 2003. Bohuchot resigned his position in February, the Morning News reported.
–Jo Anna Natale