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                      January 19, 2005

                                                  DA 05-112


VIA CERTIFIED MAIL                                
RETURN RECEIPT REQUESTED
Mr. Steven G. Mihaylo
Chief Executive Officer
Intel-Tel Technologies, Inc.
1615 S 52nd Street
Temple, AZ 85281-6233

     Re:  Notice of Suspension and of Proposed 
          Debarment,
          File No. EB-05-IH-0012

Dear Mr. Mihaylo:

     The Federal Communications Commission (``FCC'' or 
``Commission'') has received notice of the January 5, 2005 
conviction of Inter-Tel Technologies, Inc. (``Inter-Tel'') 
for mail fraud and aiding and abetting in violation of 18 
U.S.C.  1341 and 2, and for conspiracy to suppress and 
eliminate competition in violation of the Sherman Antitrust 
Act, 15 U.S.C.  1.1  Consequently, pursuant to 47 C.F.R. 
54.521, this letter constitutes official notice of Inter-
Tel's suspension from the schools and libraries universal 
service support mechanism (``E-rate program'').  In 
addition, the Enforcement Bureau (``Bureau'') hereby 
notifies Inter-Tel that we are commencing debarment 
proceedings against it.2

I.   Notice of Suspension

     Pursuant to section 54.521(a)(4) of the Commission's 
rules,3 Inter-Tel's conviction requires the Bureau to 
suspend it from participating in any activities associated 
with or related to the schools and libraries fund mechanism, 
including the receipt of funds or discounted services 
through the schools and libraries fund mechanism, or 
consulting with, assisting, or advising applicants or 
service providers regarding the schools and libraries 
support mechanism.4  Inter-Tel's suspension becomes 
effective upon the earlier of its receipt of this letter or 
publication of notice in the Federal Register.5  

     Suspension is immediate pending the Bureau's final 
debarment determination.  Inter-Tel may contest this 
suspension or the scope of this suspension by filing 
arguments in opposition to the suspension, with any relevant 
documentation.  Inter-Tel's request must be received within 
30 days after it receives this letter or after notice is 
published in the Federal Register, whichever comes first.6  
Such requests, however, will not ordinarily be granted.7  
The Bureau may reverse or limit the scope of suspension only 
upon a finding of extraordinary circumstances.8  Absent 
extraordinary circumstances, the Bureau will decide any 
request for reversal or modification of suspension within 90 
days of its receipt of such request.9  

II.  Notice of Proposed Debarment

     II.A.     Reasons for and Cause of Debarment 

     The Commission has established procedures to prevent 
persons who have ``defrauded the government or engaged in 
similar acts through activities associated with or related 
to the schools and libraries support mechanism'' from 
receiving the benefits associated with that program.10  
Based on the plea agreement upon which Inter-Tel's 
conviction is based, Inter-Tel pled guilty to mail fraud and 
other criminal offenses for activities in connection with 
its participation in the E-rate program with the San 
Francisco Unified School District (``SFUSD'').  In 
connection with the mail fraud offense charged against  
Inter-Tel, the company admitted that it:  (1) assisted 
consultants in falsely describing equipment to be supplied 
to SFUSD, by hiding equipment not eligible for funding under 
the E-rate program in order to have the program pay for it; 
(2) learned that consultants had submitted bills to the 
Universal Service Administrative Company (``USAC'') with 
inflated prices, and did nothing to inform USAC that the 
prices had been inflated by approximately $26 million above 
the amounts originally bid for the project; and (3) did 
nothing to disclose to the SFUSD superintendent or school 
board that the funding requests to USAC had been increased 
over the original amounts, that there were inflated 
estimates in the bid documents, or that equipment ineligible 
for funding had been hidden in documents submitted to USAC.  
In connection with the antitrust crime charged against 
Inter-Tel, the company admitted that it:  (1) participated 
in a conspiracy with one or more vendors of equipment and 
services related to telecommunications, Internet access 
and/or internal connections, with a purpose of suppressing 
and eliminating competition for E-rate projects; and (2) 
reached an agreement with its co-conspirators to frustrate 
the competitive process in the E-rate projects by allocating 
contracts and submitting fraudulent and non-competitive 
bids; and (3) submitted fraudulent and non-competitive bids 
in accordance with the conspiratorial agreement.11  These 
actions constitute the conduct or transactions upon which 
this debarment proceeding is based.12  Moreover, Inter-Tel's 
conviction on the basis of these acts falls within the 
categories of causes for debarment defined in section 
54.521(c) of the Commission's rules.13  Therefore, pursuant 
to section 54.521(a)(4) of the Commission's rules, Inter-
Tel's conviction requires the Bureau to commence debarment 
proceedings against it.  

     II.B.     Debarment Procedures

       Inter-Tel may contest debarment or the scope of the 
proposed debarment by filing arguments and any relevant 
documentation within 30 calendar days of the earlier of the 
receipt of this letter or of publication in the Federal 
Register.14  Absent extraordinary circumstances, the Bureau 
will debar Inter-Tel.15  Within 90 days of receipt of any 
opposition to Inter-Tel's suspension and proposed debarment, 
the Bureau, in the absence of extraordinary circumstances, 
will provide Inter-Tel with notice of its decision to 
debar.16  If the Bureau decides to debar Inter-Tel, its 
decision will become effective upon the earlier of Inter-
Tel's receipt of a debarment notice or publication of the 
decision in the Federal Register.17  

     II.C.     Effect of Debarment

     If and when Inter-Tel's debarment becomes effective, it 
will be prohibited from participating in activities 
associated with or related to the schools and libraries 
support mechanism for at least three years from the date of 
debarment.18  The Bureau may, if necessary to protect the 
public interest, extend the debarment period.19 
     
     Please direct any responses to the following address:

Romanda Williams
Federal Communications Commission
Enforcement Bureau
Investigations and Hearings Division
Room 4-C443
445 12th Street, S.W.
Washington, D.C. 20554

If Inter-Tel submits its response via hand-delivery or non-
United States Postal Service delivery (e.g., Federal 
Express, DHL, etc.), please send the response to Ms. 
Williams at the following address:

Federal Communications Commission
9300 East Hampton Drive
Capitol Heights, MD  20743
If Inter-Tel has any questions, please contact Ms. Williams 
via mail, by telephone at (202) 418-1420 or by e-mail at 
romanda.williams@fcc.gov.  If Ms. Williams is unavailable, 
you may contact Eric Bash by telephone at (202) 418-1188 and 
by e-mail at eric.bash@fcc.gov.
                                   
                                   Sincerely yours,



                                   William H. Davenport
                                   Chief
                                   Investigations and 
Hearings Division
                                   Enforcement Bureau

cc:  Leo P. Cunningham, Esq., Wilson Sonsini Goodrich & 
Rosati
     Michael F. Wood, Esq., United States Department of 
Justice, Antitrust Division
     Kristy Carroll, Esq., USAC

_________________________

1  United States v. Inter-Tel Technologies, Inc., No. CR-04-
399-CRB, Plea Agreement (N.D.Cal. filed Dec. 8, 2004) 
(``Inter-Tel Plea Agreement''). The Order accepting this 
plea agreement was signed by the Court on January 5, 2005, 
and entered on January 10, 2005.
2  47 C.F.R.  54.521; 47 C.F.R.  0.111(a)(14) (delegating 
to the Enforcement Bureau authority to resolve universal 
service suspension and debarment proceedings pursuant to 47 
C.F.R.  54.521).
3  47 C.F.R.  54.521(a)(4).  See Schools and Libraries 
Universal Service Support Mechanism, Second Report and Order 
and Further Notice of Proposed Rulemaking, 18 FCC Rcd  9202, 
9225-9227,  67-74 (2003) (``Second Report and Order'').
4  Second Report and Order, 18 FCC Rcd at 9225,  67; 47 
U.S.C.  254; 47 C.F.R  54.502-54.503; 47 C.F.R. 
54.521(a)(4).
5  Second Report and Order, 18 FCC Rcd at 9226,  69; 47 
C.F.R.  54.521(e)(1).
6  Second Report and Order, 18 FCC Rcd at 9226,  70; 47 
C.F.R.  54.521(e)(4).
7  Second Report and Order, 18 FCC Rcd at 9226,  70.
8  47 C.F.R.  54.521(e)(5).
9  See Second Report and Order, 18 FCC Rcd at 9226,  70; 47 
C.F.R.  54.521(e)(5), 54.521(f).
10 Second Report and Order, 18 FCC Rcd at 9225,  66.  The 
Commission's debarment rules define a ``person'' as ``[a]ny 
individual, group of individuals, corporation, partnership, 
association, unit of government or legal entity, however, 
organized.''  47 C.F.R.  54.521(a)(6).
11     See Inter-Tel Plea Agreement at 5-7.
12 Second Report and Order, 18 FCC Rcd at 9226,  70; 47 
C.F.R.  54.521(e)(2)(i).
13 ``Causes for suspension and debarment are the conviction 
of or civil judgment for attempt or commission of criminal 
fraud, theft, embezzlement, forgery, bribery, falsification 
or destruction of records, making false statements, 
receiving stolen property, making false claims, obstruction 
of justice and other fraud or criminal offense arising out 
of activities associated with or related to the schools and 
libraries support mechanism.''  47 C.F.R. 54.521(c).  Such 
activities ``include the receipt of funds or discounted 
services through the schools and libraries support 
mechanism, or consulting with, assisting, or advising 
applicants or service providers regarding schools and 
libraries support mechanism described in this section ([47 
C.F. R.]  54.500 et seq.).''  47 C.F.R.  54.521(a)(1).
14 See Second Report and Order, 18 FCC Rcd at 9226,  70; 47 
C.F.R.  54.521(e)(2(i), 54.521(e)(3). 
15 Second Report and Order, 18 FCC Rcd at 9227,  74.
16 See id., 18 FCC Rcd at 9226,  70; 47 C.F.R.  
54.521(e)(5).
17 Id.  The Commission may reverse a debarment, or may limit 
the scope or period of debarment upon a finding of 
extraordinary circumstances, following the filing of a 
petition by you or an interested party or upon motion by the 
Commission.  47 C.F.R.  54.521(f).
18 Second Report and Order, 18 FCC Rcd at 9225,  67; 47 
C.F.R.  54.521(d), 54.521(g).
19 Id.