Larry Lehmann of Giddings, Texas has agreed to pay $400,000 to settle allegations that he violated the False Claims Act in connection with the Federal Communications Commission’s E-rate Program, the Department of Justice announced today. The E-rate Program, created by Congress in the Telecommunications Act of 1996, subsidizes eligible equipment and services to make Internet access and internal networking more affordable for public schools and libraries. The Houston Independent School District (HISD) was one of the applicants that successfully sought and received E-rate subsidies from 2004 through 2006.
“The E-rate Program provides vital support for our nation’s students and schools,” said Stuart F. Delery, Assistant Attorney General for the Civil Division of the Department of Justice. “We are committed to protecting the integrity of this important program, which helps our children connect to the digital world.”
“Our office is committed to protecting the integrity of government initiatives,” said U.S. Attorney Kenneth Magidson. “We will continue to work closely with the Department in cases such as this one to ensure the E-rate and other federal programs are free from fraudulent and deceitful claims.”
Lehmann functioned as the CEO and managing partner of Acclaim Professional Services (Acclaim), which partnered with other companies to provide E-rate funded equipment and services to HISD during this period. The United States contended that, in violation of E-rate competitive bidding requirements and HISD procurement rules, Lehmann provided gifts and loans to HISD employees, including tickets to sporting events and two loans totaling $66,750 to an HISD employee who was involved in the procurement and administration of HISD’s E-rate projects.
The United States also alleged that Lehmann helped devise a scheme in which HISD outsourced some of its employees to Acclaim, which allowed them to continue to work for HISD while passing the cost on to the E-rate Program. The United States further alleged that, with Lehmann’s approval, Acclaim hid the cost of these employees in its E-rate Program invoices by rolling them into the cost of eligible goods and services.
The settlement with Lehmann is part of a broader investigation by the United States of E-rate funding requests submitted by HISD and the Dallas Independent School District (DISD). The government previously recovered $16.25 million from Hewlett-Packard, $850,000 from HISD, and $750,000 from DISD. The government’s investigation was initiated, in part, by a qui tam or whistleblower lawsuit filed under the False Claims Act by Dave Richardson and Dave Gillis, who investigated allegations of improprieties based on Richardson’s experience bidding for contracts at HISD and DISD. The False Claims Act authorizes private parties to file suit for false claims on behalf of the United States and share in the government’s recovery. The United States intervened in Richardson and Gillis’ lawsuit, and added Lehmann as a defendant.
“E-rate is one of the FCC’s biggest success stories, helping connect nearly every U.S. library and school to the Internet,” said Julie Veach, Chief of the FCC Wireline Competition Bureau. “We take any abuse of our rules seriously and thank the Department of Justice for their assistance in protecting the integrity of the E-rate Program for students, teachers, and libraries across the country. Today’s action is a signal to those interested in profiting at the expense of our nation’s schools and libraries: fraud doesn’t pay.”
This case was handled by the U.S. Department of Justice’s Civil Division, the U.S. Attorney’s Office for the Southern District of Texas, and the FCC’s Office of the Inspector General and Office of the General Counsel.
The claims resolved by this settlement are allegations only, and there has been no determination of liability. The lawsuit against Lehmann is captioned United States ex rel. Dave Richardson and Dave Gillis v. Larry Lehmann, Civil Action No. 4:05-cv-3836 (S.D. Tex.).