HISD Must Pay Settlement For E-Rate Violations

March 9, 2010

The Houston Independent School District has agreed to relinquish millions of dollars in requests for federal funds and pay a total of $850,000 as part of a civil settlement relating to allegations that the school district violated the False Claims Act in connection with the Federal Communications Commission’s E-Rate program.

HISD Superintendent Terry Grier signs the $850,000 settlement. Photo courtesy of HISD Media Relations.

HISD Superintendent Terry Grier signs the $850,000 settlement. Photo courtesy of HISD Media Relations.

The settlement, which stems from a 2006 investigation that found HISD employees reportedly taking gratuities from technology vendors and falsifying information given to federal auditors, will free up millions of dollars in federal aid that was frozen following incident, the district said.

The violations cited by the government also included non-competitive bidding by the district, as well as district officials receiving trips, meals and loans from vendors.

The E-Rate program, which Congress created as part of the Telecommunications Act of 1996, was designed to bridge the digital divide between more affluent suburban students and urban students who are at or below the poverty line. More than 78 percent of HISD students qualify for free and reduced-price school meals, which is an indicator of poverty.

Under the program, which is funded by fees collected from telephone users, schools apply for funds to pay for hardware and monthly connectivity service fees. The FCC oversees the E-Rate program.

Assistant Attorney General for the Civil Division Tony West said the settlement resulted from an ongoing federal investigation of possible fraud and anti-competitive conduct in the E-Rate program in Texas by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Texas, and the FCC Office of the Inspector General.

“The E-Rate Program provides critical support for Internet access and wiring to the most under-served schools in the country,” Assistant Attorney General for the Civil Division Tony West said. “We are committed to protecting the integrity of this important program that benefits our neediest children.”

For its part, the school district said it signed the settlement in order to release as much as $89.4 million in school technology funding awards that were frozen in 2006 when the investigation first uncovered wrongdoing.

As part of the settlement, HISD agreed to hire an e-rate compliance officer to closely monitor the program. The district picked veteran compliance officer Richard Patton to keep the program in check.

Patton has nearly 30 years of audit and compliance experience, the district noted. He spent 23 years with Duke Energy, Panhandle Energy and Texas Eastern Transmission in Houston in various financial audit and compliance capacities. For the past six years, Patton served as the chief compliance office for Boardwalk Pipeline Partners LP and Koch LP in Houston.

Patton, who is both a certified public accountant and a certified fraud examiner, said the district “has shown incredible commitment and teamwork” to restore the funding.

“As part of that effort, the district has strengthened its gift policies to the point that any employee who deals with an E-Rate vendor can’t accept so much as a McDonald’s hamburger,” Patton said. “The funding can be used for telecommunications services, Internet access, internal connections and maintenance of internal connections.

HISD has been trying to restore the funding for several years. When Dr. Terry Grier became superintendent last year, he made it a priority reach an agreement with the government to settle the court action. The HISD Board of Education agreed and authorized the district’s attorneys to expedite the settlement process.

HISD Board President Greg Meyers called the settlement “sound business.”

“It is a sound business decision to settle this and move on in order to help level the digital playing field for our students.”

InstantNewsWestu Staff

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