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HP to pay $16.3 million in settlement to resolve E-Rate fraud charges

HP to pay $16.3 million in settlement to resolve E-Rate fraud charges

Contractors working with the company gave gifts to school officials in Texas, two lawsuits alleged

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Hewlett-Packard will pay US$16.3 million in a settlement of alleged fraud involving a US Federal Communications Commission program to bring Internet access to schools and libraries in poor areas, the FCC and US Department of Justice announced Wednesday.

Whistleblowers told the agencies that contractors working with HP and other companies "lavished" gifts on employees at the Dallas Independent School District and the Houston Independent School District in Texas in an effort to secure E-Rate contracts that included $17 million in HP equipment, the agencies said.

The contractors gave school employees meals and entertainment, including trips on a yacht and tickets to the 2004 Super Bowl, in an effort to get inside information and win contracts that were supposed to be awarded in a competitive bidding process, the agencies said.

Most of the $16.3 million will be returned to the E-Rate program, the FCC said. The FCC will also oversee a compliance agreement agreed to by HP, the agency said.

"Broadband is key to our children's 21st century education," FCC Chairman Julius Genachowski said in a statement. "That's why one of the FCC's top

priorities is making sure E-rate works to benefit students and libraries. Today's settlement shows the extensive efforts of the FCC and DOJ to protect the E-rate program from waste, fraud, and abuse, and to deter misconduct in the future."

HP has severed its relationship with the contractors involved in the incident, which happened more than five years ago, the company said. The HP employees involved are no longer with the company.

"HP requires that all employees and partners adhere to lawful and ethical business practices," the company said in a statement.

Whistleblowers filed two related lawsuits under the US False Claims Act, which permits private parties to sue for false claims on behalf of the U.S. government and share in any recovery. In one case, the DOJ has joined the lawsuit against contractor MSE, its former CEO and a former CTO in the Dallas school district. The DOJ has joined the second lawsuit against contractor ACS.

With the HP settlement, the two whistleblowers in the Dallas case will share more than $1.4 million. The two whistleblowers in the Houston case will share nearly $800,000.


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