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11/10/2010
07:52 PM
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HP To Pay $16M To Settle E-Rate Charges

A federal fraud investigation found that HP contractors had lavished gifts on Dallas and Houston school officials in order to win contracts funded by the government's E-Rate program.

Hewlett-Packard has agreed to pay $16.25 million to settle a federal fraud investigation that found that HP contractors had lavished gifts on Dallas and Houston school officials in order to win deals.

The allegations stem from how the contractors competed for money available through the government's E-Rate program, which funds Internet access in schools and libraries. Acting on tips from whistleblowers, federal officials found that contractors working for HP and other companies provided gifts of meals and entertainment that included trips on yachts and tickets to the 2004 Super Bowl.

Through the gifts, the contractors received inside information and won contracts that were supposed to be awarded through a competitive bidding process. The Federal Communications Commission and the Department of Justice conducted the investigation that uncovered the misdoings.

Tainted contracts awarded by the Dallas and Houston independent school districts included $17 million in HP equipment. The company agreed to pay $16.25 million to settle the investigation, federal officials said Wednesday.

HP said the activities at the center of the investigation occurred more than five years ago, and "the partner relationships have been terminated and the employees involved are no longer with the company."

"HP fully cooperated with the authorities and the matter is now resolved," the company said in a statement emailed to InformationWeek.

As part of the settlement with HP, the FCC will oversee a compliance agreement "that will ensure that the company plays by the rules in the future," the commission said. The deal includes audits of HP's E-Rate business.

"If HP fails to monitor its E-Rate activities closely and abide by E-Rate program requirements, it will face substantial penalties," Austin Schlick, general counsel for the FCC, said in a statement.

In September, the FCC tightened rules within the E-Rate program to help prevent the use of gifts to win contracts.

SEE ALSO:

FCC Upgrades E-Rate Program

FCC Previews National Broadband Plan

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