Verizon Communications agreed to settle a federal investigation of its alleged violations of E-rate, a nationwide program meant to subsidize fees paid by U.S. libraries and schools for broadband internet access, the holding company of the largest wireless carrier in the country said on Tuesday. The firm was being investigated by the Department of Justice and Federal Communications Commission after issuing consultant fees to the FCC as part of its E-rate contract with the New York City Department of Education. The competent authority was examining the fees and deemed them illegal, i.e. prohibited by the very contract based on which Verizon supplied the New York City agency with broadband internet access subsidized by the federal government. While the probe wasn't officially concluded in the sense that the company was compelled to pay a fine, it has now agreed to settle the matter and pay $17.7 million for its transgressions.
Verizon remains adamant it was defrauded by Willard Lanham, a special consultant to the NYC Department of Education who was given a 37-month prison sentence in September 2012 after federal prosecutors proved he personally stole $1.7 million as part of Project Connect, an initiative to connect 573 schools to the World Wide Web in an affordable manner. Verizon said the company helped the government sentence Mr. Lanham and was also the victim of his activities which involved a systematical effort to overbill state and federal educational agencies in a six-year period ending in 2008. The NYC Department of Education previously concluded that Mr. Lanham hired subcontractors for whose hours he charged millions of dollars without any intervention or even knowledge on the part of Verizon. The telecom giant argues its involvement in the scandal is only alleged by a federal civil complaint filed against one of its consultant fees issued in 2006, four years after Mr. Lanham's scheme supposedly began.
The company is now set to adhere to a three-year compliance plan for its related operations and has ceded any right to legally demand over $100 million in undisbursed subsidy payments enabled by the E-rate program. The FCC already resolved the dispute with Verizon in May but the announcement of the settlement was postponed until the DOJ concluded its own probe into the matter.