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Before the
Federal Communications Commission
Washington, D.C. 20554
)
)
In the Matter of
) File No. EB-05-IH-0012
Inter-Tel Technologies, Inc.
)
)
NOTICE OF DEBARMENT
Adopted: June 21, 2006 Released: June 30, 2006
By the Commission: Commissioners Copps and Adelstein concurring and
issuing separate statements.
Table of Contents
Heading Paragraph #
I. INtroduction 1
II. BackGRound 4
A. Inter-Tel's Criminal Conviction 9
B. Procedural History 12
III. DISCUSSION 14
A. Debarment Decision 15
B. Additional Precautionary Measures 19
C. Inter-Tel's Remaining Arguments 21
IV. CONCLUSION 25
V. ORDERING CLAUSES 26
I. INtroduction
1. This item debars Inter-Tel Technologies, Inc. ("Inter-Tel") from all
activities associated with the schools and libraries universal service
support mechanism, also known as the E-Rate program. Like NEC, whose
conduct is addressed in the companion NEC Debarment Order released
today, Inter-Tel pled guilty to and was convicted of serious
fraud-related felonies against the E-Rate program. We find Inter-Tel's
conduct merits a debarment period of at least three years, as our
debarment rules contemplate, but, in light of several important
factors, we will impose a debarment period of one year from the
effective date of this Order. These factors include Inter-Tel's
cooperation with the U.S. Department of Justice ("DOJ") during the
investigation and prosecution of its wrongdoing, explained in a letter
DOJ filed in the record of the debarment proceeding; the mitigating
steps Inter-Tel has taken to remedy its past conduct and prevent
future problems with its participation in the E-Rate program; and the
fact that Inter-Tel states that it has not participated in the E-Rate
program during the past few years.
2. In addition, as another precaution to protect the integrity of the
E-Rate program, this item imposes certain other measures to monitor
Inter-Tel's compliance with the Commission's E-Rate rules during its
first two funding years of re-entry into the E-Rate program. We order
the Universal Service Administration Company ("USAC" or the
"Administrator") to review with heightened scrutiny Inter-Tel's
applications submitted during those two funding years. We further
direct the Administrator to conduct automatic annual audits to ensure,
during those funding years, that Inter-Tel complies with our rules,
and that E-Rate funds are disbursed for their intended purpose.
3. We take these actions as part of our on-going commitment to protect
the public interest and integrity of the E-Rate program in particular.
We will continue to take appropriate enforcement actions against bad
actors in the E-Rate program in future cases as warranted by the
particular circumstances.
II. BackGRound
4. In the companion NEC Debarment Order, we describe in detail the
critical goal of universal service to all Americans that Congress
entrusted to the Commission in section 254 of the Act, and the
Commission's implementation of that directive. Those facts are set
forth in summary fashion below and the more detailed recitation from
the companion order is incorporated herein by reference.
5. Through the universal service program, Congress sought to ensure that
quality services and affordable rates are available throughout the
country, including to specific underserved categories in our society:
eligible schools and libraries, low-income consumers, rural health
care providers, and consumers living in high-cost areas. At the
direction of Congress, the Commission implemented the E-Rate program
to provide discounts to schools and libraries for certain services,
including local and long distance telephone service, Internet access,
and internal connections. Because of the E-Rate program, millions of
schoolchildren and library patrons now have access to telecom services
and the Internet in their classrooms and libraries.
6. By Commission order, USAC administers the federal universal service
fund ("USF") and the E-Rate program. Since 1997, it has disbursed
approximately $30.3 billion to the universal service programs,
including nearly $15 billion in commitments since 1998 to support the
schools and libraries mechanism. As we explain in the NEC Debarment
Order, the Commission has imposed numerous safeguards governing the
disbursement of these E-Rate funds, including mandatory competitive
bidding by service providers, certification requirements from
authorized officers within the schools and libraries about their
services and vendors, and truthful and accurate billing for services
by vendors. The NEC Debarment Order describes how we regularly review
and update our rules as necessary to impose additional safeguards
where we see the potential for mischief.
7. In 2003 the Commission adopted a rule for automatic suspension and
initiation of debarment proceedings against persons convicted of, or
held civilly liable for, the commission or attempted commission of
fraud and other similar offenses "arising out of activities associated
with or related to the schools and libraries support mechanism."
Suspension and debarment prevent the subject from participating in the
E-Rate program and thereby protect the fund from persons adjudicated
by courts of competent jurisdiction to have committed fraud against
the program. As we explain in the NEC Debarment Order, the Commission
implemented the debarment rule to protect the integrity of the
program. Moreover, the Commission explicitly rejected a
government-wide standard where an entity "may" be debarred based on a
conviction or civil judgment. Instead, the Commission adopted an
automatic suspension and debarment process, concluding that such a
rule is necessary to accomplish our goal of eliminating waste, fraud,
and abuse.
8. Pursuant to our debarment rule, the trigger for a Commission debarment
proceeding is a civil judgment or criminal conviction in a court of
competent jurisdiction "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." We issue a notice of
suspension and initiate debarment proceedings to ensure that the
convicted person cannot continue to benefit from the program pending
resolution of the debarment process. The suspended person or any
interested party has 30 days to contest the suspension or proposed
debarment, or seek to limit its scope. After receipt of such a
request, the Commission must provide the petitioner notice of the
decision to debar, prohibiting its participation in the E-Rate
program, absent extraordinary circumstances. Since the debarment rule
became effective, there have been eight convictions of individuals and
four corporations related to their participation in the E-Rate
program. After each conviction following enactment of the rule, the
Commission initiated debarment proceedings against the perpetrators.
The Commission has debarred the eight individuals, and the Commission
today resolves the proceedings involving two of the four corporations.
The proceedings involving the other two corporations remain pending.
A. Inter-Tel's Criminal Conviction
9. Inter-Tel sells telecommunications products and services. It is a
wholly-owned subsidiary of Inter-Tel, Incorporated, a public company
that designs, contracts for manufacture, and sells telecommunications
products and services. The Inter-Tel case arises out of a DOJ civil
and criminal investigation into, among other things, Inter-Tel's
participation in the E-Rate program from December 1999 to March 2001.
On January 5, 2005, Inter-Tel pled guilty to two crimes, an antitrust
violation involving the submission of fraudulent and non-competitive
bids, and a mail fraud violation involving the submission of inflated
invoices to the Administrator. Inter-Tel was the second corporation
convicted of crimes related to the E-Rate program since the enactment
of the Commission's debarment rule.
10. The scheme originated in 1999 when Inter-Tel agreed to pay a
co-conspirators fee for all E-Rate business opportunities that the
company brought to Inter-Tel and a fee for assistance in managing
those opportunities. In early 2000, Inter-Tel submitted a bid to the
San Francisco Unified School District, including the co-conspirators'
equipment in the bid. A co-conspirator ran the bidding and ensured
that a portion of the contract was awarded to Inter-Tel. Thereafter,
Inter-Tel assisted the co-conspirators in falsifying the application
for funds by concealing video-conference equipment in the list of
equipment and prices for Inter-Tel's E-Rate submission.
Video-conferencing equipment was not eligible for E-Rate funding at
that time. In addition, a co-conspirator submitted inflated invoices
to the Administrator, which Inter-Tel learned about, but took no steps
to correct. Overall, the prices submitted for the San Francisco
Unified Public School District were approximately $26 million greater
than the amounts that vendors bid. During about the same period,
Inter-Tel also participated in a similar criminal conspiracy to
frustrate the competitive bidding process required by E-Rate program
rules in two other school districts in two states.
11. As a result of these criminal schemes, the Administrator paid E-Rate
funds to service providers that were not selected through the
competitive bidding process, for equipment that was not eligible for
E-Rate funding, and at prices that exceeded the original bid amounts
of the services and equipment. After an investigation, DOJ entered
into a civil settlement with Inter-Tel on December 8, 2004. Inter-Tel
also pled guilty to and, on January 5, 2005, was convicted of two
felony offenses, one involving mail fraud, the other involving
conspiracy to suppress and eliminate competition in violation of the
Sherman Antitrust Act. For its conduct, Inter-Tel agreed to pay
$1,721,000 in criminal fines, and to provide $7 million as restitution
and damages, $3.5 million of which is allocated to the Commission for
the USF as full restitution. Inter-Tel also agreed to implement a
compliance plan and remedial measures, and to cooperate with DOJ.
A. Procedural History
12. After the court entered the order accepting the plea agreement,
Commission staff issued the Notice of Suspension to Inter-Tel on
January 19, 2005. The Notice of Suspension was published in the
Federal Register on February 2, 2005. Inter-Tel filed a response to
the Notice of Suspension on February 22, 2005, raising several
arguments concerning the scope and duration of debarment. Among other
things, Inter-Tel argues that it has been subject to de facto
debarment from the E-Rate program beginning in early 2003.
13. On March 1, 2005, DOJ submitted a letter documenting Inter-Tel's
cooperation throughout the investigation that resulted in the guilty
plea. The letter cites the utility of Inter-Tel's continued
cooperation with the pending prosecutions of others and notes that
Inter-Tel was the second corporate plea in the E-Rate context. On
March 15, 2005, the Colusa Unified School District ("Colusa") filed a
letter that takes no position on Inter-Tel's proposed debarment but
supports Inter-Tel's request to continue providing limited services
and product sales for maintenance and repair in relation to the school
district's phone system.
III. DISCUSSION
14. In general, the Commission's debarment rule states that upon criminal
conviction of certain offenses arising out of activities associated
with or related to the E-Rate program,, the Commission shall suspend
and debar the convicted person from the E-Rate program absent
extraordinary circumstances. The rules state that the time period for
debarment is three years, although the rules contemplate that the
Commission might modify the period in particular circumstances; the
Commission might lengthen the period of debarment "if necessary to
protect the public interest," and it might reverse or limit the scope
or period of debarment "upon a finding of extraordinary
circumstances." In implementing the debarment rule, the Commission
stated that, in light of the statutory obligation to preserve and
advance universal service, the Commission would set a very high
threshold for parties claiming that their debarment was not warranted
in circumstances in which a court of competent jurisdiction has
concluded that the person has committed some form of fraud related to
the E-Rate program. The Second Report and Order offers only one
example of such "extraordinary circumstances" -- reversal of the
conviction or judgment upon which the debarment was based. As
explained below, the conduct leading to Inter-Tel's criminal
conviction merits a debarment period of at least three years, but in
light of several important factors, we limit the debarment period to
one year. We find, based on the unique circumstances of this case,
imposing a one-year debarment period is in the public interest.
A. Debarment Decision
15. We debar Inter-Tel because it has been convicted of fraud-related
offenses involving its participation in the E-Rate program, and there
are no extraordinary circumstances sufficient to justify avoidance or
waiver of debarment. On January 5, 2005, Inter-Tel pled guilty to and
was convicted of two counts of criminal misconduct arising out of its
conduct in the E-Rate program from 1999 to 2001. Specifically,
Inter-Tel was convicted of an antitrust violation involving the
submission of fraudulent and non-competitive bids and a mail fraud
violation involving the submission of inflated invoices to the
Administrator. Pursuant to section 54.521(b) of our rules, the
Commission "shall . . . debar" a company convicted of a crime
involving fraud in the E-Rate program, absent extraordinary
circumstances. The offenses for which Inter-Tel was convicted are
expressly listed as "causes for suspension and debarment" in section
54.521(c) of our rules. Strict application of the debarment rule to
remove bad actors from the program for a period of time is necessary
to protect the integrity of the E-Rate program. Accordingly, we
conclude that Inter-Tel must be debarred to protect the program
against additional waste, fraud, and abuse.
16. We also recognize, however, the existence of several important
countervailing considerations that warrant a reduction in the standard
debarment period. First, DOJ, as obligated by Inter-Tel's Plea
Agreement, filed a letter describing Inter-Tel's cooperation with the
investigation of the company. DOJ states that Inter-Tel cooperated by
"supplying information and documents as well as encouraging current or
former employees to cooperate." DOJ characterizes this cooperation as
enabling it "to expand [its] knowledge base to criminal behavior at
school districts not previously covered in other pleas" and notes that
"the nature, speed, and extent of Inter-Tel's cooperation has been
very helpful in developing [its] investigation to date." A second
countervailing consideration is, as DOJ notes, that "Inter-Tel has
also agreed to an intensive, multi-year program of monitoring,
training, and auditing of government procurement contracts" at its
expense. Consistent with this, Inter-Tel asserts that it has
implemented a comprehensive anti-fraud and antitrust compliance plan.
DOJ also notes that Inter-Tel has accepted full responsibility for its
wrongdoing through payment of nearly $9 million in fines, civil
settlement, and restitution. DOJ considered these actions to be
valuable to this and future prosecutions. Finally, we recognize that
there has been a substantial period of time during which the company
has not participated in the E-Rate program, since 2003.
17. Under these circumstances, including DOJ's recognition of Inter-Tel's
cooperation, the company's programmatic changes and remedial measures,
and its lack of participation in the E-Rate program for a number of
years, we limit Inter-Tel's debarment period to one year. We debar
Inter-Tel for a longer period than NEC in the companion order we
release today, principally because DOJ appears to value the
cooperation of Inter-Tel less than that of NEC. As explained in the
NEC Debarment Order, DOJ submitted not one but two letters in the
record in that proceeding. The first letter DOJ submitted in the NEC
proceeding was similar to the letter DOJ submitted in the instant
proceeding; DOJ submitted both letters as part of its obligation under
the Plea Agreements with both corporations to advise agencies such as
the Commission about each company's cooperation during its
investigation of them, and DOJ described their cooperation in similar
terms. As explained in the NEC Debarment Order, however, DOJ submitted
a second letter in that proceeding that went beyond merely reciting
NEC's cooperation, by explaining the importance of NEC's cooperation
in particular as the first company to break ranks within its
conspiracy. DOJ specifically notes that NEC's cooperation enabled DOJ
to uncover conspiratorial misconduct that might never have been
otherwise detected. Although DOJ notes that Inter-Tel's cooperation
has been helpful, DOJ believes that NEC's cooperation, as the first
company "to turn on its cooperators," is deserving of special
consideration.
18. Thus, although we find that there are countervailing considerations in
both cases to justify a reduction in the general debarment period of
three years, we find under the unique facts and circumstances of each
case that the public interest is best served by debarring NEC for a
period of six months, while debarring Inter-Tel for a period of one
year. We believe a period of one year adequately reflects credit for
Inter-Tel's cooperation with DOJ, which was less important to DOJ than
NEC's cooperation. Accordingly, we debar Inter-Tel Technologies, Inc.
for one year from the effective date of this Order.
A. Additional Precautionary Measures
19. As an additional precaution to protect the E-Rate program, we put in
place two monitoring measures to ensure Inter-Tel's compliance upon
its re-entry into the E-Rate program. First, we order USAC to review
with heightened scrutiny Inter-Tel's applications submitted during the
first two funding years after re-entry.
20. Second, we order the Administrator to conduct automatic annual audits
regarding Inter-Tel's compliance with the Act and the Commission's
rules governing the E-Rate program, for each of the first two funding
periods upon Inter-Tel's re-entry. We find these additional
precautionary measures are necessary to ensure that E-Rate funds are
used only for their intended purpose and that the program is not
subject to additional waste, fraud, or abuse.
A. Inter-Tel's Remaining Arguments
21. We deny Inter-Tel's request to continue to receive E-rate
reimbursement for limited products/service sales for the maintenance
and repair of its systems for existing E-rate customers. Having
determined that Inter-Tel's conduct warrants debarment, we find that
our goal of preventing waste, fraud, and abuse compels us to deny
Inter-Tel any reimbursement of E-rate funds during its period of
debarment. We conclude that, during the debarment period, Inter-Tel is
prohibited from receiving any E-rate reimbursement for limited
services and products sales for maintenance and repair of its systems
for pre-existing E-rate customers. Schools and libraries that
currently have Inter-Tel system installations may make alternative
arrangements with other service providers for maintenance and repair
products and services.
22. Similarly, we have considered but must deny Colusa's request that
Inter-Tel be permitted "to continue to provide limited services and
product sales for maintenance and repair" of a system installed in
Colusa's district office and for Inter-Tel to install that system in
four other schools. Although Colusa acknowledges that program rules
permit it to change service providers to do such work, the school
states that a change would impose a hardship. Colusa notes, however,
that in updating its 2005 E-Rate bid application, which was due no
later than February 2005, it was "referred to a third party dealer who
could provide us with a bid for the Inter-Tel phone system we would
require." It states that the need for a referral "caused a delay in
getting a bid and an overall hassle dealing with a different party
than Inter-Tel." We are sympathetic to the inconvenience caused to
Colusa by the need for the referral. It does appear, however, that the
school was able to engage another party to bid on the project and
therefore it does not appear that there is a pressing need for
Inter-Tel's services in Colusa.
23. Inter-Tel argues that our rules are flawed because they do not credit
carriers with time under suspension or de facto debarment. We find
these arguments are sufficiently addressed by our decision because we
limit Inter-Tel's debarment period to one year.
24. Finally, we find that this debarment action is effective as to
Inter-Tel Technologies, Inc., including any and all of its successors
and assigns. Inter-Tel argues that its parent company, Inter-Tel,
Inc., and other subsidiaries of Inter-Tel, Inc., should not be
debarred because Inter-Tel Technologies, Inc. was the only entity to
be convicted. We agree and note that our debarment of Inter-Tel does
not extend to Inter-Tel's parent or to other subsidiaries of
Inter-Tel, Inc. as long as those companies are not successors or
assigns of Inter-Tel Technologies, Inc.
IV. CONCLUSION
25. Based on the foregoing, Inter-Tel Technologies, Inc., including its
successors and assigns, is hereby debarred from the E-Rate program for
one year, beginning on the earlier of Inter-Tel's receipt of this
Order, or its publication in the Federal Register. During the period
in which Inter-Tel will serve its debarment, Inter-Tel, including its
successors and assigns, is prohibited from all activities "associated
with or related to the schools and libraries support mechanism,"
including "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 the
schools and libraries support mechanism." We will continue to take
appropriate actions in future cases as warranted by the particular
circumstances to protect the integrity of the program.
V. ORDERING CLAUSES
26. Accordingly, IT IS ORDERED, pursuant to section 54.521 of the
Commission's rules, 47 C.F.R. S 54.521, that Inter-Tel Technologies,
Inc., including its successors and assigns, IS DEBARRED from the
schools and libraries universal service support mechanism for one
year, effective upon the earlier of Inter-Tel's receipt of this Notice
of Debarment or publication in the Federal Register.
27. IT IS FURTHER ORDERED that the Universal Service Administrative
Company shall review with heightened scrutiny Inter-Tel's applications
submitted during the first two funding years upon its re-entry into
the E-Rate program.
28. IT IS FURTHER ORDERED that the Universal Service Administrative
Company shall conduct automatic annual audits on Inter-Tel's E-Rate
activities during the first two funding years upon its re-entry into
the E-Rate program.
29. IT IS FURTHER ORDERED that the Enforcement Bureau shall send, by
certified mail/return receipt requested, a copy of this Notice of
Debarment to Angela B. Styles, Miller & Chevalier, Chartered, Counsel
to Inter-Tel Technologies, Inc., 655 Fifteenth Street, NW, Suite 900,
Washington DC 20005-5701, to John T. Nakahata, Harris, Wiltshire &
Grannis, LLP, Counsel to Inter-Tel Technologies, Inc., 1200 18th
Street, NW, Suite 1200, Washington, DC 20036.
30. IT IS FURTHER ORDERED that the Enforcement Bureau staff shall send,
via email, a copy of this Notice on the release date to Angela B.
Styles, [1]astyles@milchev.com, and John T. Nakahata,
[2]JNakahata@harriswiltshire.com, Counsel to Inter-Tel Technologies,
Inc.
31. IT IS FURTHER ORDERED, pursuant to section 54.521 of the Commission's
rules, 47 C.F.R. S 54.521, that this Notice SHALL BE PUBLISHED in the
Federal Register.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
CONCURRING STATEMENT OF
COMMISSIONER MICHAEL J. COPPS
Re: In the Matter of Inter-Tel Technologies, Inc., File No. EB-05-IH-0012
The E-Rate program continues to provide the essential digital tools our
children need for success in the Digital Age by connecting our schools and
libraries to the Internet. Indeed, E-Rate is a lifeline for the hardest to
reach and poorest children who are eager to learn and at risk of being
left behind as technology moves forward. Like any great program, E-Rate
cannot meet its full potential without regular review and care. And in
this regard, there are many who deserve credit for their vigilance in
rooting out waste, fraud and abuse from the program. The FCC, Department
of Justice and E-Rate's Schools and Libraries Division have all stepped up
to the plate to provide greater oversight of the program to ensure that
limited resources find their rightful homes and are used most effectively.
The conviction of Inter-Tel Technologies, Inc. and today's debarment is
further evidence of these efforts. Inter-Tel's activities were designed to
bilk the E-Rate program of millions of dollars and it is certainly this
type of case the FCC had in mind when three years ago it enacted its
debarment requirements. I therefore concur in the decision to debar
Inter-Tel from the E-Rate program for the period of one year. However, as
I said when the Commission enacted the debarment rules, "we need to be
dead serious about rooting out abuses." In point of fact, activities like
those engaged in by Inter-Tel typically merit a lengthier debarment
period. The Commission missed an opportunity here to send a sterner
message to other corporations and individuals contemplating similar
wrongdoings that such activities will not be tolerated by this Agency.
SEPARATE STATEMENT OF
COMMISSIONER JONATHAN S. ADELSTEIN
CONCURRING
Re: InterTel Technologies, Inc., Notice of Debarment, File No.
EB-03-IH-0012, FCC 06-92 (June 21, 2006).
Since its inception, the universal service support mechanism for schools
and libraries (commonly referred to as the E-rate program) has opened up a
new world of learning and opportunity for millions of school children and
library patrons. To ensure the continued success of the E-Rate program, we
must remain committed to monitoring, auditing, reviewing and reinforcing
the program. A critical part of our Commission oversight is the use of
debarment, which prohibits bad actors from participating in the program.
Accordingly, I support our decision in this Order to debar Inter-Tel
Technologies from all involvement in the E-Rate program, one of our first
such actions against a corporate defendant.
I concur in, rather than approve, this Order because I would have
supported a longer debarment period. The Commission's rules provide for a
debarment period of three years, which may be extended to protect the
public interest or reduced upon a finding of extraordinary circumstances.
I note that the Department of Justice has encouraged the Commission to
exercise our debarment policy in a way that encourages early and complete
cooperation from defendants, and I recognize that the Commission may take
into account payment of fines and restitution, the length of time that a
provider has not participated, and most importantly a high degree of
cooperation with law enforcement. Even weighing these factors, the
one-year debarment period adopted in this Order falls short, given the
scope and seriousness of the fraud-related activities in this case. Strong
enforcement encourages compliance, and penalties should be substantial
enough to constitute more than just a cost of doing business. In this
case, a longer debarment period would have sent a stronger and clearer
message that fraud will not be tolerated.
NEC-Business Network Solutions, Inc., Notice of Debarment and Order
Denying Waiver Petition, FCC 06-91 (the "NEC Debarment Order"). This case
arises out of the same underlying federal criminal investigation as
another debarment matter involving NEC-Business Network Solutions, Inc.
("NEC").
See 47 U.S.C. S 254.
NEC Debarment Order at PP 4-9.
See 47 U.S.C. S 254(b).
47 U.S.C. S 254(b); 47 C.F.R. SS 54.502-03.
Funding for the E-Rate and other universal service programs come from
mandatory contributions to the USF by all telecommunications carriers
providing interstate and international services. 47 U.S.C. S 254.
Telecommunications carriers may pass the costs of these contributions
along to consumers including through line-item fees on the consumers'
monthly telephone bills. 47 C.F.R. S 54.712.
This amount was disbursed as of April 30, 2005.
See Universal Service - Schools and Libraries Support Mechanism Commitment
Status Weekly Report, dated April 29, 2005.
See NEC Debarment Order at P 7.
NEC Debarment Order at P 7, n.12.
See 47 C.F.R. S 54.521; Second Report and Order, 18 FCC Rcd at 9227, P 74.
The rule defines a "person" as any individual, group of individuals,
corporation, partnership, association, unit of government or legal entity,
however organized. 47 C.F.R. 54.521(a)(6).
See NEC Debarment Order at P 8; Second Report and Order, 18 FCC Rcd 9225,
P 66.
Second Report and Order, 18 FCC Rcd 9227, P 74; Universal Service Fund
Oversight NPRM, 20 FCC Rcd at 11347-48, PP 97-8.
47 C.F.R. S 54.521(c).
47 C.F.R. S 54.521(e)(1); Second Report and Order, 18 FCC Rcd 9226, P 69.
47 C.F.R. SS 54.521(e)(3), 54.521(e)(4).
47 C.F.R. S 54.521(e)(5). Our rule states that notice of debarment will be
provided within 90 days of receipt of information submitted by the
respondent in response to a suspension notice. We may waive our own rule
pursuant to 47 C.F.R. S 1.13 in the public interest. To allow the
Commission to have a full opportunity to analyze this matter, we hereby
waive the 90 day rule, as it applies to Inter-Tel's responsive pleading,
filed February 22, 2005.
47 C.F.R. S 54.521(g).
Letter from Maureen F. Del Duca, Chief, Investigations and Hearings
Division, Enforcement Bureau, to Oscar Alvarez, Connect2 Internet Network,
Inc., DA 03-2706, Notice of Debarment, December 23, 2003 ("Alvarez
Debarment"); Letter from Maureen F. Del Duca, Chief, Investigations and
Hearings Division, Enforcement Bureau, to John Angelides, Connect2
Internet Network, Inc., DA 03-4088, Notice of Debarment, December 23, 2003
("Angelides Debarment"); Letter from Maureen F. Del Duca, Chief,
Investigations and Hearings Division, Enforcement Bureau, to Duane
Maynard, Howe Electric, Inc., DA 03-4089, Notice of Debarment, December
23, 2003 ("Maynard Debarment"); Letter from William H. Davenport, Chief,
Investigations and Hearings Division, Enforcement Bureau, to John Dotson,
DA 04-3828, Notice of Debarment, December 6, 2004 ("Dotson Debarment");
Letter from William H. Davenport, Chief, Investigations and Hearings
Division, Enforcement Bureau, to John Henry Weaver, DA 05-1727, Notice of
Debarment, June 23, 2005 ("Weaver Debarment"); Letter from William H.
Davenport, Chief, Investigations and Hearings Division, Enforcement
Bureau, to Haider Bokhari, DA 05-1730, Notice Debarment, June 23, 2005
("H. Bokhari Debarment"); Letter from William H. Davenport, Chief,
Investigations and Hearings Division, Enforcement Bureau, to Qasim
Bokhari, DA 05-1728, Notice of Debarment, June 23, 2005 ("Q. Bokhari
Debarment"); Letter from William H. Davenport, Chief, Investigations and
Hearings Division, Enforcement Bureau, to Ronald R. Morrett, DA 05-2349,
Notice of Debarment, August 30, 2005 ("Morrett Debarment").
One of the debarment proceedings involves Inter-Tel, and the other
involves NEC. See supra note 1.
Letter from William H. Davenport, Chief, Investigations and Hearings
Division, Enforcement Bureau, to Tom Tsao, Vice President, Premio Inc., DA
06-489, Notice of Suspension and Initiation of Debarment Proceedings,
February 28, 2006 ("Premio Suspension Notice); Letter from Kris A.
Monteith, Chief, Enforcement Bureau, to Robert J. Buhay, Chief Financial
Officer, NextiraOne, LLC, DA 06-951, Notice of Suspension and Initiation
of Debarment Proceedings, April 28, 2006 ("NextiraOne Suspension Notice).
See United States v. Inter-Tel Technologies, Inc., Docket No.
CR-04-399-CRB, Plea Agreement (N.D. Cal. filed Dec. 8, 2004) ("Inter-Tel
Plea Agreement"); United States v. Inter-Tel Technologies, Inc., Docket
No. CR-04-399-CRB, Judgment (N.D. Cal. filed Jan.12, 2005 and entered Jan.
13, 2005) ("Inter-Tel Judgment"); United States v. Inter-Tel
Technologies, Inc., No. CR 04-0399, Information (N.D. Cal. filed Dec. 6,
2004) ("Inter-Tel Information"). As we note in the NEC Debarment Order,
the fraudulent schemes in which Inter-Tel and NEC participated, among
other things, have been the focus of Congressional hearings. See NEC
Debarment Order at P 9.
See Inter-Tel Plea Agreement at 2-7, 18 U.S.C. SS 1341-2, 15 U.S.C. S 1.
Inter-Tel Plea Agreement at 4.
47 C.F.R. SS 54.502-54.503.
Inter-Tel Plea Agreement at 5-6.
Inter-Tel Plea Agreement at 7, Exhibit A.
Inter-Tel Plea Agreement at 3-7.
See Inter-Tel Plea Agreement, Appendix B, Settlement Agreement.
On January 5, 2005, the Court approved Inter-Tel's plea agreement and
imposed judgment, which was entered on January 13, 2005. See Inter-Tel
Plea Agreement; see also Inter-Tel Judgment at 1.
18 U.S.C. S 1341, 15 U.S.C. S 1.
Inter-Tel Plea Agreement at 10.
See Inter-Tel Plea Agreement at 10-11 and Exhibit C, Special Conditions of
Probation, Settlement Agreement at 4.
Letter from William H. Davenport, Chief, Investigations and Hearings
Division, to Steven G. Mihaylo, Chief Executive Officer, Inter-Tel
Technologies, Inc., Notice of Suspension and Proposed Debarment, 20 FCC
Rcd 1372 (Inv. & Hearings Div., Enf. Bur. 2005) ("Notice of Suspension").
Letter from Angela B. Styles, Miller & Chevalier Chartered, Counsel for
Inter-Tel, to Romanda Williams, Investigation and Hearing Division,
Enforcement Bureau, Federal Communications Commission, dated February 22,
2005 ("Inter-Tel's Response").
See Inter-Tel's Response at 16-19.
See Letter from Scott D. Hammond, Deputy Assistant Attorney General, U.S.
Department of Justice, to Marlene H. Dortch, Secretary, Federal
Communications Commission, dated March 1, 2005 ("DOJ Letter").
See DOJ Letter at 1-2.
Letter from Sheryl Bailey, Business Manager, Colusa Unified School
District, to Ms. Romanda Williams, Investigations and Hearings Division,
Enforcement Bureau, Federal Communications Commission, dated March 15,
2005 ("Colusa Letter").
47 C.F.R. S 54.521(b).
47 C.F.R. S 54.521(f).
Second Report and Order, 18 FCC Rcd at 9225, P 64.
47 C.F.R. S 54.521(f).
See Inter-Tel Plea Agreement at 5-7.
47 C.F.R. S 54.521(b).
47 C.F.R. S 54.521(c).
See Second Report and Order, 18 FCC Rcd at 9225, P 66.
We also reject Inter-Tel's contention that the Compliance Program it
agreed to as part of the Special Conditions of Probation is sufficient to
fully protect the program against additional waste, fraud and abuse. As
noted above, debarment is the only way to ensure the absence of additional
waste, fraud and abuse.
See DOJ Letter at 1; Inter-Tel Plea Agreement at 14, P 19.
See DOJ Letter at 1.
Id. at 1.
See DOJ Letter at 1. Further, none of the individuals directly involved in
the inappropriate conduct remains employed with Inter-Tel or its
affiliates. Id.
Inter-Tel Compliance Report Update to the FCC Enforcement Bureau and
Office of the Inspector General, dated May 3, 2005; Inter-Tel Compliance
Report to the FCC Enforcement Bureau and Office of the Inspector General,
dated March 4, 2005; Inter-Tel's Response at 11. Inter-Tel further submits
that when its criminal conduct came to light, it promptly adopted
management changes and introduced a policy requiring review of all new and
ongoing E-Rate projects. Inter-Tel's Response at 11.
See DOJ Letter at 2.
See DOJ Letter at 2.
See Inter-Tel's Response at 16-19. Inter-Tel states that USAC had deferred
all of its invoices, including those that were not covered under the
fraudulent conduct, once DOJ initiated an investigation on certain
Inter-Tel E-Rate activities. Id.
See NEC Debarment Order at PP 23-25.
See NEC Debarment Order at P 25.
See Fifth Report and Order, 19 FCC Rcd at 15822-23, P 44. We note that the
Commission currently is considering what particular requirements, if any,
that it should apply in conducting heightened review of E-Rate program
participants. See Universal Service Fund Oversight NPRM, 20 FCC Rcd at
11345, P 91.
We direct the Administrator to inform any schools and libraries with
current applications that are affected by this debarment so that they may
make alternative arrangements.
Colusa Letter at 1.
Colusa Letter at 1.
Colusa Letter at 1.
See Inter-Tel's Response at 14-19.
We note that our decision to limit Inter-Tel's debarment period recognizes
Inter-Tel's non-participation in the E-Rate program for a substantial
period of time and sufficiently addresses the alleged suspension or de
facto debarment arguments contained in Inter-Tel's pleading. See
Inter-Tel's Response at 21 ("Inter-Tel Technologies respectfully requests
that the Commission consider the totality of these circumstances when
determining an appropriate period of debarment."). See also supra at P 17.
Inter-Tel's Response at 4-6.
See 47 C.F.R. S 54.521(e)(5).
See 47 C.F.R. SS 54.521(a)(1), 54.521(a)(5), 54.521(d).
Federal Communications Commission FCC 06-92
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Federal Communications Commission FCC 06-92
Federal Communications Commission FCC 06-92
Federal Communications Commission FCC 06-92
References
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