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Judge Ponders $8.71 Million Penalty to Settle E-Rate Fraud Charges

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A consulting company in Tempe, Ariz., agreed last month to plead guilty to being part of schemes to defraud the federal E-rate program in school districts in California and Michigan, but the federal judge in the case balked at that resolution.

The U.S. attorney in San Francisco announced Dec. 8 that Inter-Tel Technologies Inc., a subsidiary of Inter-Tel Inc., would pay a total of $8.71 million in criminal and civil penalties to settle two felony charges.

But U.S. District Judge Charles R. Breyer refused to accept that resolution because of what he called the case’s “egregious facts.” He was scheduled to consider additional evidence this week.

Inter-Tel, based in Tempe, Ariz., was charged with allocating contracts and submitting rigged bids for E-rate projects at two unidentified districts in California and Michigan. The company also was charged with entering into a scheme to defraud the E-rate program in San Francisco, including trying to conceal plans to install items that were ineligible for E-rate aid and submitting fake documents to defeat a probe of the legitimacy of the funding request.

Inter-Tel said in a statement that it no longer employs the two sales representatives directly involved in the schemes, and that the plea agreement would require it to implement reforms while serving a three-year probation.

Vol. 24, Issue 16, Page 4

Published in Print: January 5, 2005, as Judge Ponders $8.71 Million Penalty to Settle E-Rate Fraud Charges

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