Original URL: http://www.theregister.co.uk/2004/09/23/ibm_erate_probe/

IBM and others blamed in E-rate scandal hearing

Think of the children!

By Ashlee Vance

Posted in Government, 23rd September 2004 18:01 GMT

IBM and a couple of other IT vendors have been fingered by the Feds for having troubling roles in the scandalous E-rate program that was designed to bring Internet and telecommunications technology to US schools.

IBM was called out this week during a hearing by the House Commerce Committee unpleasantly called "Waste, Fraud, and Abuse Concerns in the Wiring of Our Nation's Schools to the Internet." Evidence presented during the hearing suggested that IBM offered certain education bodies a "kickback" if they would help the vendor secure a part in receiving federal E-rate funds. This is just the latest in a string of revelations as to how corrupt the E-rate program - started during the Clinton administration - has been.

Evidence, including videos and documents, showed that IBM, NEC-Business Network Solutions and Video Network Communications Inc. (VNCI) goaded the National Alliance of Black School Educators (NABSE) into going after more federal E-rate funds in exchange for a 1.5 percent cut of the contracts. An IBM representative stated that an employee who signed this offer has left the company.

NEC-Business Networks Solutions has already pleaded guilty to charges including collusion and wire fraud related to the E-rate program. Two former VNCI staffers required to attend the hearing refused to testify. The IBM representative denied that the firm ever dolled out kickbacks for extra E-rate business.

Earlier this month, the Chicago Tribune broke a damaging story on the city's E-rate failures. Cities across the US were meant to benefit from a tax placed on consumer phone lines that would fund the expansion of technology at schools and help shrink the digital divide.

The paper found that Chicago has squandered millions in federal funds and awarded no-bid contracts to companies with ties to the E-rate administrators. Chicago's lack of action could cost it $50m in funding. To this day, only half of Chicago's schools have Internet access in every classroom, the paper discovered, despite city claims of 85 percent coverage. ®

Related links

Forbes take on the hearing
IDG's take

Related stories

Chicago schools hurt by web project gone wrong
NEC sub defrauds US gov
EU ministers in broadband powwow