Six companies and individuals involved in a federal program to subsidize Internet access in the nation's schools and libraries have been indicted on allegations of defrauding the program, known as E-Rate.
Some of the companies and individuals are accused of submitting fraudulent documents to the government and being overcompensated for equipment headed to school districts in Arkansas, California, Michigan, New York, Pennsylvania, South Carolina and Wisconsin. Others are accused of rigging bids and conspiring toward that goal, and of charging the government for goods, such as video equipment, that are not covered by the program.
The indicted include Howe Electric Inc. of Fresno; Sema4 Inc. of San Juan Capistrano; Digital Connect Communications of San Juan Capistrano; Expedition Networks Ltd. of North Hills; ADJ Consultants Inc. of Temecula and their owners Allan Green and Judy Green.
Also indicted are Video Network Communications Inc., of Portsmouth, N.H., and its former sales representative George Marchelos of Saratoga and two other individuals.
Howe's attorney, Michael Molfetta, said: "The allegations paint a broad brush based on the assertions of a lot of people who are either making assumptions or are flat out misrepresenting what occurred."
Tauren Clark, Expedition Networks' attorney, said the company got mixed up with the wrong people, never had any intention of defrauding the government and made no money from the E-Rate program. He said the company will try to settle the charges.
Attorneys for the other defendants did not return phone calls.
"This indictment sends a strong signal that defrauding federal programs and thereby jeopardizing future funding for schools will lead to criminal charges," Kevin Ryan, the U.S. attorney in San Francisco, said in a statement.
The 22-count indictment did not say how much the E-Rate program was bilked because of the alleged wrongdoing. The Justice Department declined to address that topic.
The indictments stem from a federal grand jury probing the nationwide Internet-access funding program the Federal Communications Commission inspector general has said is beset by poor design and is susceptible to abuse by those selling the equipment to the schools.
Thursday's indictments come on top of similar allegations levied last year against Inter-Tel Technologies Inc. of Arizona and NEC Business Network Solutions Inc., part of Japanese electronics maker NEC Corp.
Financed through phone charges, the $2.25 billion-a-year program provides discounted Internet access and internal connection gear such as wiring and adaptors — all obtained from the private sector through a bidding process. The Federal Communications Commission inspector general said last year that, of 122 audits of the E-Rate program performed that year, about a third revealed substantial violations.