Two Indicted in Connection With a Scheme to Defraud the Federal E-rate Program
Memphis, TN – Charles A. "Chuck" Jones, the part owner of two now-dissolved technology companies, Technology Associates, Inc. and Integrated Computer Solutions, Inc., and Mark J. Whitaker of Murray, Kentucky, were indicted on federal criminal charges of conspiracy to commit wire fraud and wire fraud. U.S. Attorney D. Michael Dunavant announced the indictment today.
According to the indictment, under the Federal Communications Commission’s E-rate Program, the government provides funding to qualified schools to purchase internet access and other telecommunications services and equipment for their students. The E-rate Program pays up to 90% of the cost of these technology services and equipment. Two of the Program’s core eligibility requirements are that applicant schools conduct a fair and open competitive bidding process and that each applicant school pay some percentage of the cost of the internet access and other telecommunications services and equipment. The E-rate Program pays the balance of that cost, which ranges from 20% to as high as 90%. As described in the indictment, the reason the schools are required to pay a portion of the costs are: a) to ensure that schools have a financial incentive to negotiate for the most favorable prices so that E-rate Program funds are not wasted; and b) to ensure that schools purchase only those items and services they truly need.
The indictment further charges that Jones and Whitaker conspired with an individual identified as A.J., to whomJones gave money and other things of value in return for A.J.’s assistance. The co-conspirators used A.J. and A.J.’s position with schools in Crockett County, Tennessee and Missouri to violate Program rules. Additionally, the co-conspirators submitted and caused to be submitted fabricated documents and made false statements and representations to the E-rate Program administrator, which included assertions that Jones’ companies had invoiced schools for the proper co-payment amounts. These actions were taken to circumvent E-rate Program rules and review and to obtain payments from the E-rate Program administrator to Jones’ companies. Jones’ companies received approximately $8.5 million from the E-rate Program and Jones used funds from the companies’ bank accounts for his own benefit.
U.S. Attorney D. Michael Dunavant said, "Protection of federal grant programs that provide needed services and equipment to our schools in West Tennessee is a top priority of this office. When dishonest offenders conspire to defraud these programs for their own selfish gain and unjust enrichment, they not only steal tax dollars, but also hurt local schools in the process. We will continue to work with our federal partners to root out and expose such fraud against the government, to hold offenders accountable, and to recover ill-gotten gains."
FCC Inspector General David Hunt stated: "Today’s charges allege that Mr. Jones and Mr. Whitaker knowingly and willfully violated the bedrock requirements of the FCC’s E-rate Program while hiding these violations from the Program’s administrator, all with the goal of enriching Mr. Jones with E-rate funds, thus depriving students of the benefits of this program – up-to-date telecommunications services. I thank U.S. Attorney Dunavant for prosecuting this case. We will continue to work with our law enforcement partners to pursue those who seek to illegally take money from the FCC’s programs."
This case was investigated by the FCC Office of Inspector General and the Federal Bureau of Investigation.
Assistant United States Attorneys Tony Arvin and Murre Foster are prosecuting this case on the government’s behalf.
The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.