Federal prosecutors in New York City charged Internet-services company Connect2 Internet Networks owner John Angelides and three of his employees December 18 with conspiring to steal millions of dollars through the government’s e-rate program that is designed to help pay for school and library Internet technology.
The program, paid through telephone-bill fees, subsidizes schools at a rate of 20 to 90% for telecommunications costs. Under the rules, designed to prevent wasteful spending, even the poorest schools must pay 10% of the costs.
Prosecutors said that between 1998 and 2001, the company preyed on about 36 schools that were eligible for the 90% reimbursement rate and received more than $9 million in e-rate money, according to the December 19 New York Times. According to the criminal complaint, the defendants bought the schools more expensive technology than they could afford and billed the government for the entire amount, including the school’s share.
In one case, federal agents recorded Angelides asking an Islamic Elementary School official to tell auditors that they had received company bills for its share of the cost, but “because of the events of September 11,” the school did not have the money. He said that they “should use 9/11 as a wedge” and that the auditors would understand because the school “is Islamic.”
An official of the Universal Service Administrative Company, which administers the e-rate plan, said that the case is the first involving the program in which fraud accusations have led to criminal charges.
Posted December 23, 2002.