Funding fraud
Fajardo-Velez was eventually sentenced to three years in prison and fined $4 million for irregularities associated with the use of U.S. Education Department funds. The E-rate discounts allocated between 1998 and 2000 were supposed to be used to wire 1,500 of Puerto Rico's schools for the Internet. In 2001, only nine schools had been wired.

Auditors also found nearly $23 million in equipment that had never been installed in the schools, along with $3 million per month spent on high-speed Internet connections in schools that didn't even have PCs. Since 2001, Puerto Rico hasn't received any E-rate funding.

Puerto Rican officials have worked hard to rectify the situation. Cesar Rey-Hernandez, the new secretary of education, said Puerto Rico has been installing gear previously purchased with E-rate subsidies. By the end of August, he expects 1,000 schools to be connected to the Internet through satellite technology. The FCC seems confident about Puerto Rico's reforms and is allowing it to compete for E-rate funds in 2004.

SBC (AT&T) got caught too:

In Chicago, about $8 million worth of equipment provided by telecommunications carrier SBC Communications was never deployed in the city's public schools. One E-rate funding requirement is that equipment be purchased, delivered and installed in the same year that it is funded by the program.

»news.com.com/Eroding+E-rate/2009···723.html