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January 19, 2005
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
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:
Federal Communications Commission
Investigations and Hearings Division
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
firstname.lastname@example.org. If Ms. Williams is unavailable,
you may contact Eric Bash by telephone at (202) 418-1188 and
by e-mail at email@example.com.
William H. Davenport
cc: Leo P. Cunningham, Esq., Wilson Sonsini Goodrich &
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.
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. §
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).