HP Settles Fraudulent Bid Case For $16 Million

Hewlett Packard will pay a $16.25 million to settle an investigation into allegations it lavished gifts on two school district customers in exchange for high-dollar contract bids, the Federal Communications Commission said Wednesday.

The settlement was the result of an investigation by the FCC along with the U.S. Department of Justice, which found that contractors working with HP and other companies had bribed employees with the Dallas Independent School District and the Houston Independent School District in order to be awarded lucrative contracts, including around $17 million in HP equipment, the FCC said Wednesday.

Some of the payola included yacht trips and 2004 Super Bowl tickets, as well as other meals and entertainment provided by the HP contractors in an attempt to access inside information and win bids that ostensibly were to be achieved through a competitive bidding process, the FCC said.

The fraud case was triggered after whistle blowers tipped off officials, spurring an extensive FCC and DOJ investigation.

Much of the $16.25 million settlement is anticipated to go to the E-Rate program, an organization that provides financial backing for Internet connections in schools and libraries. Resellers from technology companies, such as HP, work through the E-Rate program to obtain contracts that provide schools and libraries with Internet infrastructure.

"Broadband is key to our childrens' 21st century education," said FCC Chairman Julius Genachowski, in a statement. "That's why one of the FCC's top priorities is making sure E-rate works to benefit students and libraries. Today's settlement s shows the extensive efforts of the FCC and DOJ to protect the E-rate program from waste, fraud and abuse, and to deter misconduct in the future."

In addition, the FCC will monitor HP's future performance with a compliance agreement that will help ensure the company abides by established bidding regulations. Among other things, the compliance agreement entails HP employee training and provides audits for HP's E-rate business.

"If HP fails to monitor its E-rate activities closely and abide by E-rate program requirements, it will face substantial penalties," said Austin Schlick, FCC general council, in a statement.

HP said the company has terminated the relationships with the contractors involved in the fraudulent E-Rate deals, while involved employees were no longer with the company.

"HP requires that all employees and partners adhere to lawful and ethical business practices. The activities at the center of this investigation occurred more than five years ago, the partner relationships have been terminated, while HP employees who violated E-Rate regulations were no longer with the company. HP fully cooperated with the authorities and the matter is now resolved," HP said in a statement.