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DOJ Gets Another Settlement in Texas E-Rate Investigation

A Texas businessman has agreed to pay $400,000 to settle Department of Justice allegations he gamed the E-rate subsidy program, the latest in a long-running investigation of alleged E-rate abuses, including by supplying game tickets and loans to a school contracting officer.

The E-rate is the FCC-overseen program to provide advanced telecommunications — these days high-speed Internet - to schools and libraries.

According to DOJ, Larry Lehmann Giddings, CEO of Acclaim Professional Services, partnered with others to provide E-rate funded equipment and services, but in the process offered gifts and loans to Houston Independent School District (HISD) employees - including "tickets to sporting events and two loans totaling $66,750 to an HISD employee who was involved in the procurement and administration of HISD’s E-rate projects" - in violation of competitive bidding requirements and HISD procurement policy.

In addition, HISD outsourced some employees to Acclaim, allowing them to stay employed while passing along the cost of their salaries to the E-rate program, said DOJ.

The settlement is the latest in a wider investigation of alleged E-rate irregularities involving Texas schools that resulted in a $16.25 million settlement with Hewlett-Packard, $850,000 from HISD, and $750,000 from the Dallas Independent School District.

The FCC emphasized the overall success of the program. "E-rate is one of the FCC's biggest success stories, helping connect nearly every U.S. library and school to the Internet," said Julie Veach, chief of the FCC's Wireline Competition Bureau, in a DOJ announcement of the settlement. "We take any abuse of our rules seriously and thank the Department of Justice for their assistance in protecting the integrity of the E-rate Program for students, teachers, and libraries across the country."

The program, which the FCC is in the process of reforming, is part of the larger Universal Service Fund subsidy that has been under fire from congressional Republicans for the potential for waste, fraud and abuse.