Two more indicted on E-Rate fraud charges

Arrests come after guilty pleas from related conspiracy

WASHINGTON -- The former owner of three Kansas computer services companies and his mother have been indicted on charges related to defrauding a government program designed to help schools and libraries in poor areas connect to the Internet, the U.S. Department of Justice said.

Leonard Douglas "Doug" LaDuron, former owner and president of Serious ISP Inc., Myco Technologies Inc. and Elephantine Corp., was charged yesterday with fraud conspiracy and making false statements in U.S. District Court for the District of Kansas in Kansas City. His mother, Mary Jo LaDuron, also known as Mary Jo Gault, also faces conspiracy charges.

The DOJ accused the LaDurons of being part of the same conspiracy for which two former owners of New Jersey-based DeltaNet Telecom Inc. agreed to plead guilty on Wednesday. Benjamin Rowner and Jay H. Soled were also charged with conspiracy, and they agreed to cooperate with the DOJ's investigation into E-Rate fraud as part of their guilty pleas, the DOJ said.

At least 10 schools from New Jersey to California were hurt by the fraud scheme, the DOJ said.

Doug LaDuron submitted false statements and concealed important information from the Universal Service Administrative Co., which administers the E-Rate program for the U.S. Federal Communications Commission, the DOJ said. He was also charged with making false statements about his employment status to the U.S. Department of Housing and Urban Development to obtain housing assistance.

Mary Jo LaDuron fraudulently represented herself as an independent consultant, and steered E-Rate contracts to companies owned by her son, Rowner and Soled, the DOJ alleged.

"Fraud on the federal E-Rate program steals funding that otherwise would help economically disadvantaged schools in America," Thomas Barnett, assistant attorney general in charge of the DOJ's antitrust division, said in a statement.

E-Rate, a program begun with the Telecommunications Act of 1996, provides funding to school districts and libraries in poor areas. Schools can receive money for cable, for Internet backbone equipment, and for monthly Internet and telephone service fees.

U.S. lawmakers have repeatedly raised concerns about fraud and waste at the E-Rate program over the last several years.

Six people and 12 companies have pleaded guilty or have been found guilty in the DOJ's ongoing investigation into fraud at the E-Rate program. Fines and restitution in the investigations has totaled more than $40 million.

The fraud conspiracy charges and false statement charges carry a maximum penalty per count of five years in prison and a $250,000 fine. The fine may be increased depending on how much money the defendants made from the alleged fraud.

Copyright © 2008 IDG Communications, Inc.

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