Former co-owners of DeltaNet, a New Jersey computer service provider, have
agreed to plead guilty to charges related to defrauding a government program
designed to help schools and libraries in poor areas connect to the Internet,
the U.S. Department of Justice announced.
The DOJ filed conspiracy charges Wednesday in U.S. District Court for the District
of Kansas in Kansas City against Benjamin Rowner and Jay H. Soled, former owners
of DeltaNet, for their role in defrauding the E-Rate program, the DOJ said.
The pair conspired to defraud the E-Rate program by submitting false statements
and keeping important information from the Universal Service Administrative
Co., which administers the E-Rate Program for the U.S. Federal Communications
Commission, the DOJ said.
Rowner and Soled participated in the conspiracy between 1999 and 2003, and
the fraud affected schools from California to New York, the DOJ said. With their
plea agreement, pending a judge's approval, the men agreed to cooperate with
the DOJ's ongoing investigation into E-Rate fraud.
The conspiracy charges each carry a maximum penalty of five years in prison
and a US$250,000 fine. The maximum fine may be increased to twice the gain derived
from the crime or twice the loss suffered by the victims of the crime, if either
amount is greater than the statutory maximum fine, the DOJ said.
"Our investment in this investigation is paying off," Kent Nilsson,
the FCC's inspector general, said in a statement. "Every unlawful dollar
obtained by individuals and companies deprives impoverished schools of much-needed
funding, and we, along with the DOJ and FBI, will continue to aggressively pursue
those who would steal from the E-Rate fund."
E-Rate, a program begun with the Telecommunications Act of 1996, provides funding
to school districts and libraries in poor areas. Schools can receive money for
cable, Internet backbone equipment and for monthly Internet and telephone service
fees.
Rowner and Soled are the latest in a long line of defendants who have faced
fraud or other charges related to the E-Rate program in recent years. The DOJ
Antitrust Division's ongoing investigation has resulted in six companies and
12 people either pleading guilty, being convicted or entering into civil settlements.
Defendants have been sentenced or agreed to pay more than $40 million in fines
and restitution.
Trials are pending in three E-Rate cases, and one defendant is a fugitive.
