The year 2009 will bring a new President to the White House who has promised lots and lots of new federal money to fund various state and federal projects. Some have gone so far as to say that President-elect Obama will supervise the largest spending program since the Eisenhower Administration built the federal interstate system.
With great opportunity comes great risk, however. This blog has previously argued that the Federal False Claims Act and state false claims acts such as the Virginia Fraud Against Taxpayers Act have their own role to play in protecting this large expenditure of federal funds. Furthermore, because anyone with knowledge of fraud on the federal government or a state government can come forward under the qui tam provisions of such statutes, each individual has their own role to play.
As one example of the sort of mischief that follows large federal expenditures, today we will look at fraud in the E-rate Program. I selected this example because we have all heard a great deal recently about federal funding to extend broadband Internet access to remote areas of the United States.
E-Rate, a program authorized by Congress in the Telecommunications Act of 1996, was designed to ensure that all eligible schools and libraries have affordable access to modern telecommunications and information services. Up to $2.25 billion annually is available to provide eligible schools and libraries with discounts under the E-rate program for authorized services.
Under the E-Rate program, schools can receive money for cabling, Internet infrastructure items (i.e., servers, PBX switches and so forth), and the reimbursement of monthly Internet and telephone service fees. E-rate operates under the auspices of the Federal Communications Commission (FCC).
In a nutshell, eligible institutions can file a federal FCC Form 471 with the FCC listing the services and other items desired. Privater vendors can access these postings, and then directly contact the entity to bid on providing the work. E-rate is only available to institutions that have certain qualifying characteristics. If the entity seeking funding is a school, for example, a certain percentage of the school’s students must qualify for the National School Lunch Program. There is also a preference for rural schools and libraries.
As we see in other contexts such as healthcare, a cottage industry has sprouted up around defrauding the E-rate Program. Such fraudfeasors normally call themselves “Education Consultants” or some such title, and they promise to obtain E-rate funding for anyone who hires them. One such individual is former “Education Consultant” Judy N. Green, who was sentenced to 7.5 years in prison for participating in E-rate fraud in Arkansas, California, Michigan, New York, Pennsylvania, South Carolina, and Wisconsin.
Green was convicted of orchestrating schemes to defraud the E-Rate Program of funds by inflating the cost of eligible equipment and services in order to pay for ineligible equipment and services, and by misrepresenting schools’ ability and willingness to pay their portions of the projects’ costs. She also conspired to rig bids in favor of companies and individuals that had business relationships with her.
Anyone with first-hand knowledge of fraud on the E-rate program has the ability to step forward and take action to stop it utilizing the qui tam provisions of the Federal False Claims Act. Last year, the United States recovered more than $1 billion as a result of whistleblowers who decided enough was enough. Those who come forward are eligible to receive an award of between 15 and 30 % of the recovered funds.
To learn more about becoming a whistleblower under either the Federal False Claims Act or the Virginia Fraud Against Taxpayers Act, please click here.