Jun 21, 2004
Every phone user in the country pays a fee to the E-rate program. This federal program supposedly pays for computerizing schools and libraries that can't otherwise afford computers.
It actually pays to line the pockets of contractors. Since 1998, the program has paid out over eight billion dollars through more than 200,000 grants. However, there was next to no auditing, no oversight to ensure the money really went to provide needed computer equipment for the children.
As contractors tumbled to the free money involved, massive fraud followed.
IBM built a 35-million-dollar network for El Paso schools, so complex that it then got another 62-million-dollar contract to build its own brand-new maintenance support center! SBC got eight million, then stockpiled the equipment it sold in its own warehouse.
The frauds are so large – and embarrassing – that a committee of Congress is finally investigating. Forty-two criminal investigations are under way. NEC has already cut a deal, pleading guilty to preying on schools in Michigan, Oklahoma, Arkansas and California. Millions of dollars have been repaid by other companies to avoid prosecution.
Because of the size of the scandal, many sample audits were done in the past year. They showed that roughly one-third of the sampled programs were taking money and not fulfilling their contracts.
One Congressman said, "You couldn't invent a way to throw money down the drain that would work any better than this."
Well, wasn't that the intent?