Department of Justice Seal Department of Justice
THURSDAY, MAY 17, 2007
(202) 514-2007
TDD (202) 514-1888

Kansas City, Missouri School District & Justice Department
Resolve E-Rate Internet Program Fraud Claims

WASHINGTON – The Kansas City, Missouri School District (KCMSD) has agreed to relinquish over $13.6 million in claims for federal funds and to pay the United States $66,000 as a civil settlement relating to false claims and false statements in connection with the Federal Communication Commission’s (FCC) E-Rate program from 2002 to 2006, the Justice Department announced today.

The E-Rate program, created by Congress in the Telecommunications Act of 1996, provides funding for needy schools and libraries to connect to and utilize the Internet. The E-Rate program is funded by monies collected from telephone users. The FCC oversees the program.

The United States contended that KCMSD pursued claims for payments for a contract that had been cancelled, did not comply with the mandatory competitive bidding process, and improperly extended contracts to avoid re-bidding. As part of the agreement between the school district and the United States, KCMSD agreed that three of its employees and the district’s consultant, Deitrich Lockard Group, all of whom handled KCMSD’s E-Rate applications, would no longer play a role in the program’s application and funding process for the school.

“The E-Rate Program makes federally mandated funds available to the poorest schools in the nation for Internet access and wiring,” said Peter D. Keisler, Assistant Attorney General for the Civil Division. “False claims to this very important federal program will not be tolerated.”

The United States learned of the allegations settled by KCMSD when a relator, American Fiber Systems Inc., filed a qui tam or whistleblower action in May 2006. The settlement resolves both the relator’s and the United States’ claims against KCMSD.

The resolution announced today resulted from an ongoing federal investigation of fraud and anti-competitive conduct in the E-Rate program in connection with the Kansas City schools. The investigation is being conducted jointly by the Justice Department's Civil Division, the U.S. Attorney's Office for the Western District of Missouri, and the FCC Office of the Inspector General.