Hewlett-Packard: Yachts and Super Bowl Tickets During School Bidding

Hewlett-Packard agreed to a $16.25 million settlement over alleged E-Rate bid influence in Dallas and Houston. The whistleblower suits alleged that defendants provided school officials with yacht use and sporting-event tickets while bidding on technology contracts. For someone inside a vendor or school district, the connection between the benefits and the pending purchase is the heart of the story.

The Department of Justice announced the civil settlement on November 10, 2010. It covered two False Claims Act cases concerning the Dallas Independent School District and the Houston Independent School District.

What E-Rate Competitive Bidding Was Supposed to Protect

E-Rate funds Internet access for needy schools and libraries. The Federal Communications Commission oversees the program, which Congress created in the Telecommunications Act of 1996. As the Justice Department explained, its money comes from telephone users.

The districts were buying technology services from companies competing for their contracts, with E-Rate funding supporting those purchases. The alleged inducements went to officials at the schools making the buying decisions. An insider’s account of those local relationships can explain something that the name of the federal funding program cannot.

This is the concern behind E-Rate procurement fraud: a program intended to connect students to the Internet can become an opportunity to buy influence over the purchase. The companies competing honestly for the same school business depend on a fair comparison. We see an ugly mismatch in these allegations: a program for needy schools, with yacht use among the benefits allegedly offered to officials.

The Alleged Benefits Came While Contracts Were Being Bid

Both lawsuits alleged illegal gifts and inducements during bidding. The Justice Department’s account included the use of several yachts and tickets to sporting events, including the 2004 Super Bowl. The timing connects the hospitality to the purchasing decision the government said it compromised.

Several yachts. For school technology bids.

For a vendor employee, that allegation makes the purpose of a benefit as important as its expense category. For a district employee, it makes the recipient’s part in the purchase important. We would want to understand who offered the benefit, who received it, which contract was being pursued and how the recipient participated in the decision.

The government’s account placed HP alongside former business partners. The seller whose products reach the school, the business partner pursuing the contract and the official receiving a benefit may appear in different parts of the transaction. Our work is to connect those parts to the alleged influence over public money.

Dallas and Houston Had Separate Whistleblower Cases

Two whistleblowers brought the Dallas suit, and two others brought the Houston suit. The government joined both cases against HP’s former business partners when it announced the HP settlement.

Dallas and Micro Systems Engineering

In Dallas, the government joined the case against Micro Systems Engineering, the company’s former chief executive officer and the Dallas school district’s former chief technology officer. That combination put the vendor side and the district’s technology leadership in the same alleged purchasing relationship.

The Justice Department announcement also reported a separate criminal finding: in July 2008, the former Micro Systems Engineering chief executive and the former district chief technology officer were found guilty of bribery in federal court in Dallas for conduct relating to the district.

Houston and Analytical Computer Services

In Houston, the government joined the suit against Analytical Computer Services, another former HP business partner. Its whistleblowers were a different pair from those who brought the Dallas case.

The School Districts Had Their Own Settlements

Before HP’s settlement, Dallas Independent School District had settled related claims for $750,000, and Houston Independent School District had settled related claims for $850,000. Both districts also agreed to give up pending claims for payment.

Why the Relationships Matter Alongside the Bid

Procurement records describe the purchase. Information about the people and businesses behind it can reveal the interests affecting the decision. Transparency International’s 2024 paper, Transparency, Accountability, and Integrity of Public Procurement Systems, explains why procurement information becomes more useful when compared with ownership, financial-interest and other records:

The paper identifies large sums, complicated processes, many participants and room for discretionary decisions as procurement corruption risks. It also describes safeguards on both sides of the purchase: public bodies need clear responsibilities and controls, and suppliers need controls against winning contracts through corruption.

A contract tells us what the school bought. An insider may be able to explain the relationship between a vendor, a partner and a school official while that purchase was being decided. Our assessment brings the purchasing records and that account together.

The same paper describes access to bid-evaluation criteria, award decisions and contract-performance information as useful to public scrutiny. For this kind of case, we examine how the stated basis for selecting a vendor fits the communications and benefits an insider knows about. A sales employee may understand the purpose of an entertainment expense. A technology employee may understand who shaped the choice. An employee who handled the district’s purchasing paperwork may be able to connect the two accounts.

The Same Program, Different Ways to Influence the Purchase

AT&T Technical Services settled a separate E-Rate case in Indiana in 2009 for $8,266,414. The government alleged noncompetitive bidding, claims for ineligible goods and services, overbilling, and facilitating a payment or profit to a program applicant.

That case connected the choice of vendor with what reached the bill. HP’s Texas settlement concerned alleged inducements during competition for technology contracts. Someone familiar with the vendor’s dealings with the applicant may know a part of the transaction that the contract price alone cannot explain.

In August 2010, HP agreed to a $55 million settlement in a separate matter involving GSA pricing and payments for product recommendations. That case concerned alleged payments to systems integrators for recommending HP products and incomplete commercial information used in negotiating a General Services Administration contract. The E-Rate cases concerned school funding and benefits allegedly offered to school officials.

How Much Money Can a Whistleblower Get From a Qui Tam Lawsuit?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

In the HP E-Rate settlement, the Justice Department announced that the Dallas whistleblower pair would receive about $1.4 million together.

For a school or vendor insider, the useful starting point is the purchase you understand: the bid, the benefit and the people involved. We assess how that knowledge can support a whistleblower case and bring in government procurement whistleblower lawyers who know the purchasing arrangement.

You Know Who Influenced the School’s Purchase

If you saw benefits offered while a school technology contract was being decided, talk with our whistleblower experts about the bid and the people behind it. We work beside you to build the case and bring in government procurement whistleblower lawyers who understand E-Rate purchasing and vendor influence. You bring your knowledge of the transaction, and we bring the judgment and partnership to pursue it with you.