FCC Blocks Seven Behind Fraud Scheme from E-Rate

WASHINGTON, April 17, 2025 – The Federal Communications Commission suspended Wednesday seven people convicted of fraud from its Universal Service Fund programs. The New York residents pleaded guilty in 2022 to running a scheme by which they secured more than $14 million from the agency’s E-Rate program over six years.

As the Justice Department described the arrangement, two of the people worked as consultants who helped religious schools outside New York City participate in the program. They were paid by four other people to circumvent the vendor bidding process required by the program and instead ensure schools contracted with companies owned by those people. The participating schools were then overcharged or charged for expensive equipment they couldn’t use, with E-Rate funds covering the bulk of the costs. 

The group received $14 million in E-Rate money but had requested more than $35 million, according to the DOJ.

The consultants were sentenced to two years in prison, and the vendors got sentences ranging from four years to time served. An official at one of the schools who assisted with the scam was sentenced to nine months.

The agency’s E-Rate program supports internet discounts for schools and libraries. It spent more than $2.6 billion in 2024.

“These programs have important purposes, and those purposes do not include enriching grifters. When it comes to misuse of American taxpayer money, we are not in a forgiving mood,” Patrick Webre, acting chief of the FCC’s enforcement bureau, said in a statement.

Under FCC rules, the people are suspended from “participating in any activities associated with or related to” E-Rate or other FCC subsidies, meaning they can’t receive funds or services from the program or somehow assist participants. The agency also had to initiate a proceeding to ban them from the programs for at least three years.

E-Rate is supported by the FCC’s $8.5 billion-per-year Universal Service Fund, which also pays for rural networks and discounts for low-income households and healthcare centers. It’s funded by fees on interstate voice revenue.

The fund’s legality is being challenged in court, with the Supreme Court set to issue a decision later this year.