U.S. Settles Lawsuits Against Hewlett-Packard and Intervenes Against its Business Partners for Violating FCC Competitive Bidding Rules in Texas

WASHINGTON – The United States has settled two whistleblower lawsuits for $16.25 million alleging that Hewlett-Packard Co. (HP) violated the competitive bidding rules of the Federal Communications Commission’s (FCC) E-Rate Program at the Dallas and Houston Independent School Districts in connection with technology services contracts with those school districts.   At the same time, the United States announced that it was intervening in those same lawsuits against HP’s former business partners, Micro Systems Engineering (MSE) and Analytical Computer Services (ACS), as well as against several individuals.

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 E-Rate program.

The two lawsuits were filed under the False Claims Act’s whistleblower provisions, which permit private parties to sue for false claims on behalf of the United States and share in any recovery.   The first lawsuit was filed in Dallas by Dan Cain and Pamela Tingley.   The United States is intervening in that lawsuit against MSE; Ruben Bohuchot, the former chief technology officer of the Dallas Independent School District; and Frankie Wong, the former chief executive officer of MSE.   The second lawsuit was filed in Houston by Dave Richardson and Dave Gillis.   The United States is intervening in the second lawsuit against ACS.  

Both lawsuits allege that the defendants provided illegal gratuities and inducements to school officials, such as the use of several yachts and tickets to sporting events, including the 2004 Super Bowl, while the companies were bidding on school district contracts funded by the E-Rate Program.   From the settlement with HP announced today, relators Cain and Tingley will receive $1,424,969, while Richardson and Gillis will receive $796,280.

The United States has elected to intervene in both lawsuits, under the authority of the False Claims Act which allows the government to intervene in and take over any whistleblower action filed.   The United States’ notices of intervention stated that the United States expects to file its own complaint in each case within 45 days.

“The E-Rate Program provides much-needed funding that allows underprivileged students to access the Internet,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We will continue to pursue those who use improper inducements to undermine the integrity of this important program.”

In July 2008, both Wong and Bohuchot were found guilty of bribery in U.S. District Court in Dallas for their conduct relating to the Dallas Independent School District and sentenced to more than 10 years in prison.    In addition, the United States previously settled related claims against the Dallas Independent School District for a payment of $750,000 and against the Houston Independent School District for a payment of $850,000.   Both school districts also agreed not to seek payment for pending claims.  

Assistant Attorney General West acknowledged the cooperation among the many government agencies participating in this ongoing matter, including the Justice Department’s Civil Division, the U.S. Attorney’s Offices for the Northern and Southern Districts of Texas, and the FCC’s Office of the Inspector General and Office of General Counsel.