Hewlett-Packard to pay $16.5 million to settle fraud investigation

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Hewlett-Packard will pay $16.5 million to the federal government following an ‘extensive investigation’ into the company for alleged fraud in its participation with the government’s E-Rate program, the Justice Department said Wednesday.

E-Rate pays for Internet connections at schools and libraries around the country. The program came under scrutiny from the Federal Communications Commission and Justice Department after whistle-blowers alleged that contractors working with HP and other companies bribed school employees to win contracts.

The contractors plied school officials in Dallas and Houston with lavish gifts, including meals, trips on a yacht and tickets to the 2004 Super Bowl, the Justice Department said. In return, the school employees supplied the contractors with inside information that helped them secure contracts, including for about $17 million in HP equipment.

As part of the civil settlement, the FCC will oversee a compliance agreement with HP to ensure that the company does not violate rules in the future, the Justice Department said. Most of the $16.5 million will be returned to the E-Rate program.

‘If HP fails to monitor its E-Rate activities closely and abide by E-Rate program requirements, it will face substantial penalties,’ Austin Schlick, the FCC’s general counsel, said in a statement.

To discourage future abuses, the FCC adopted additional rules in September to promote competitive bidding in school districts.

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-- Shan Li