Inland Valley Daily Bulletin
School district purchasing problems
PUSD under investigation: Millions misspent
District has 48 'servers' for one middle school; "... It's like buying 48 pieces of furniture for a small apartment'
By Sara A. Carter and Kenneth Todd Ruiz
Staff Writers

LINK

Friday, July 22, 2005 - POMONA - Pomona Unified School District misspent at least $2.4 million from a taxpayer-funded program meant to connect schools in low-income areas to the Internet, a Daily Bulletin investigation has found.

Since 1998, the district has spent nearly $36 million in E-Rate funds to build a massive, districtwide computer network. However, it misused a good chunk of those millions to buy personal computers, servers used for unapproved purposes and other items not allowed by the program, despite warnings from federal officials.

The U.S. Schools and Libraries Division of the Federal Communications Commission, which oversees the funding, is auditing the district for its spending in 2005 but has not looked at prior years.

E-Rate money, culled from a tax on every phone customer in the United States, reimburses up to 90 percent of what qualifying school districts spend to connect schools to the Internet. In 2002, Pomona Unified netted $11.4 million in E-Rate funds.

At least $5.3 million of that amount, plus $700,000 from bond money, was paid to Corona-based Spectrum Communications for products and services.

That year, $2,355,692 from E-Rate was misused to buy laptop computers that were disguised in Spectrum invoices as "servers" or "network equipment," going so far as to spend $257,140 to buy server-class operating systems to run on each of them.

"If this is the case, this is a serious violation of E-Rate rules," said Tanya Sullivan, senior director of education and communications of Universal Service Administrative Co. in Washington, D.C., which oversees E-Rate through the Schools and Libraries Division. "If that invoice said "laptop computers,' we wouldn't have paid for it," Sullivan added.

On Thursday, David Jaramillo, Pomona's director of technology, did not deny that E-Rate eligibility rules were violated but said everything done in the district was included in its funding application, which received federal approval. Jaramillo was unable to furnish that documentation by Thursday evening.

"We understand the eligibility requirements and we review those," Jaramillo said at Palomares Middle School on Thursday.

District spokesman Richard Martinez said Pomona followed E-Rate rules and obtained approval for the funding.

Despite E-Rate guidelines clearly prohibiting such a use, the district purchased 460 personal laptop computers for teachers with the funds.

On Thursday afternoon, Courtney Malone, a computer technician at Palomares, was servicing the 35 Apple Powerbooks purchased for the school in 2002. The server operating systems, costing $559 per computer, were not installed on the machines.

Another eight laptops invoiced by Spectrum as "networking equipment," but also used by teachers, could not be accounted for Thursday.

Spectrum did not return calls seeking comment.

Officials from other school districts said E-Rate funding is insufficient to meet the needs of every school in the nation each year, and schools with fewer low-income students often receive little or none of the money.

Rick Brinble, technology director for the Alta Loma school district, said his district doesn't bother applying for much of the funds because they are exhausted by schools with more qualifying students.

"Certainly, if a district that is receiving a greater share of the funding misuses the funds, then it puts other school districts at a disadvantage," Sullivan said.

Pomona Unified applied for more than $12 million in E-Rate funding in 2001 for the 2002 school year but was rejected because it wanted 417 monitors - ineligible items under E-Rate guidelines, Sullivan said.

"The district was informed that they could not purchase monitors or any other form of personal computers," she said. "They were denied the extra funding and their total amount of funding was reduced."

The district reapplied, and program officials deducted the $1.4 million price tag for the monitors, Sullivan said.

Spectrum invoices for "installation and configuration of Apple servers" from March and April of 2002, approved and paid in May by the school board, show 404 Apple G4 Powerbook laptops purchased for various school sites.

Six months later, the district purchased 56 laptops for almost a quarter of a million dollars. As with all E-Rate purchases, the district paid 11 percent of the amount from a bond measure; the federal government picked up the other 89 percent.

In some instances, "server" allocations for individual school sites appear to be obviously questionable. For example, invoices show 48 laptops purchased for Marshall Middle School and 83 for Garey High.

"There's obviously no reason for a middle school to have 48 servers," said Curtis Lee, director of technology for the Walnut Valley Unified School District. "In a typical school, you may need one to five servers. It's like buying 48 pieces of furniture for a small apartment."

Spectrum charged the district $255,000 in labor for "installation" of the 460 laptops.

Another $300,000 worth of PowerPC servers were purchased in September and October of 2002.

On Thursday at Palomares and Pomona High, systems administrator Dan Mellem described the jobs performed by the servers -- such as user file sharing and Quicktime media streaming -- none of which are eligible under 2002 E-Rate rules.

Data cabinets at school sites contained Proliant servers purchased in October 2002, for $5,700 to $9,000 each. Some are legitimately used to manage users on the network, while others operate as Internet "proxy servers," also a violation of E-Rate policy.

Further, according to invoices from Spectrum, Pomona schools paid hundreds of dollars more than the retail price for the computers.

The G4 Powerbooks made their debut in 2001 for a retail price of $2,999. Spectrum charged more than $3,500 per laptop, plus hundreds more for service plans, keyboards, mice and external Zip drives -- all of which are ineligible fund uses.

"Typical pricing for education is about 10 (percent) to 15 percent below MSRP and sometimes lower if part of a large competitive bid," Lee said.

Pomona Unified isn't the only district to come under scrutiny since the E-Rate program began. More than 40 criminal investigations under way across the United States have diminished the program's success.

In April, a 22-count indictment was issued against six companies and five individuals in San Francisco. The defendants are accused of submitting fraudulent documents to the government to purchase equipment, said Win Himsworth, an E-Rate specialist in New York.

"The biggest problem is when vendors say, "We can get you this for free and not to worry,' because (the vendor) will fill out the application to get the products, and that is also against the law," Himsworth said. "Even though it is a wonderful program, there's been a lot of publicity with ... people out there savvy enough to take advantage of it."

For example, SBC Communications Inc. had to refund $8.8 million to the program for equipment that was never installed in schools in Chicago. Last year, a grand jury in Milwaukee charged two people for billing E-Rate $1.2 million for services it never implemented. The Department of Justice recently indicted five people suspected of falsifying invoices and other documents claiming to have provided E-Rate equipment and services to three schools in Milwaukee and Chicago, according to the Schools and Libraries Division Web site.

The most publicized investigation of fraud and mismanagement occurred in Atlanta, Himsworth added.

In April, a two-year investigative audit prompted the Department of Justice to subpoena the Atlanta Unified School District and its vendors for all spending records.

Rep. Joe Barton, R-Texas, who heads the House Committee on Energy and Commerce, has expressed concern about the reports of fraud in the program and said legislation is needed to reform E-Rate, said committee spokesman Terry Lane.

The Oversight and Investigations subcommittee, chaired by Rep. Ed Whitfield, R-Kentucky, was formed several years ago expressly to investigate E-Rate. The subcommittee has been holding special hearings on the program since last year.

"We did a series of hearings on this over the last year," Lane said. "What I can tell you is that these hearings expose that there is fraud, abuse and waste in the E-Rate program across the nation."

Sullivan said her office would have the results of its 2005 audit available by next month and would also look into past E-Rate deals with Pomona Unified.

Since 1998, the Pomona Unified School District has spent $35,979,864 in E-Rate dollars. Following is a breakdown of E-Rate funding granted during the past seven years. Funds granted each year are generally spent in later years.

Year • Pomona • State • National
2004 • $2,534,294 • $260,890,474 • $2,277,734,514
2003 • $1,017,566 • $358,572,945 • $2,695,504,694
2002 • $7,645,080 • $236,390,371 • $2,178,834,892
2001 • $11,434,558 • $337,829,825 • $2,208,170,850
2000 • $4,237,640 • $426,021,693 • $2,084,578,867
1999 • $2,774,290 • $266,436,450 • $2,154,013,190
1998 • $6,336,437 • $208,094,101 • $1,714,316,267
* Figures have been rounded to the nearest dollar.

SOURCE: U.S. Schools and Libraries Division of the FCC

Some of the expenditures by the Pomona Unified School District, 89 percent of which were paid for by a federal program to connect low-income schools to the Internet:

Qty • Item • MSRP (each) • School paid
404 • Apple G4 Powerbooks • $2,999 • $3,573
404 • External Zip drives • $160 • $310
Labor to "install" laptops: $255,000

SOURCE: Spectrum Communications invoices and product manufacturers

Sara A. Carter can be reached at (909) 483-9552, or by e-mail at sara.carter@dailybulletin.com .
Kenneth Todd Ruiz can be reached at (909) 483-8555, or by e-mail at todd.ruiz@dailybulletin.com .

Inland Valley Daily Bulletin
Pomona schools' Internet spending raises questions

LINK

Saturday, July 23, 2005 - A federal audit of Pomona Unified School District's spending under a federally funded computer-buying program is ongoing.

But that doesn't mean it's too early to ask some questions about the district's wanton misspending of U.S. funds.

E-Rate is a program meant to allow schools in low-income areas to buy equipment needed to connect their students to the Internet. It is funded by a tax on phone customers and administered by the U.S. Schools and Libraries Division of the Federal Communications Commission. That division is auditing Pomona schools' 2005 spending of E-Rate funds.

Since 1998, PUSD has received some $36 million in E-Rate funds, which are meant to reimburse up to 90 percent of qualified spending by districts.

A Daily Bulletin investigation of the district's 2002 spending identified at least $2.4 million that was unallowable under E-Rate rules.

For that one year's spending, the district received $11.4 million – half a percent of all the E-Rate funding in the entire United States. In 2002, it paid at least $5.3 million of that amount, plus $700,000 in district bond money, to Spectrum Communications of Corona for computer equipment and services. More than $2.35 million from E-Rate was spent on laptop computers, which were listed on Spectrum invoices as 'servers" or 'network equipment." A federal official said E-Rate would not have paid invoices for laptops.

Some of the questions the Daily Bulletin investigation raises:

• Why would the district need 48 laptops, supposedly used as servers, at one middle school? Why would it need 83 at one high school?

• Why would the district pay $559 per computer for server operating systems?

• Why would the district pay Spectrum $255,000 for the 'installation" of 460 laptops? Can it cost $554 to 'install" each laptop?

• Why would the district pay $500 above retail price for each Apple G4 Powerbook laptop, when schools generally get a 10 percent to 15 percent discount from retail, even more in a large competitive bid?

• Did the district solicit competitive bids for the millions of dollars it spent?

• Does the fact that PUSD Director of Technology David Jaramillo's brother is an executive for Spectrum Communications trouble the district?

• Why has the federal Schools and Libraries Division of the FCC done such a poor job of monitoring compliance with its own rules? More than 40 criminal investigations of alleged E-Rate fraud are under way across the United States, which implies the feds pay fairly indiscriminately, only to find rampant abuse in audits later.

Of course, the really sad part of such abuse is that it siphons off funds that could legitimately be used to provide Internet access for students in other low-income schools, had not so much money been diverted to expenditures E-Rate was not meant for.

It would behoove Pomona Unified to do some investigating of its own. The district ought to determine for itself who, if anyone, has done wrong.

Of course, depending on how high up the look-the-other-way supervision goes, it might be that only a federal investigation will determine the extent of the blame.

Inland Valley Daily Bulletin
Laptops a joke, teacher says
Pomona computers were "nothing more than a glorified DVD player"
By Kenneth Todd Ruiz
Staff Writer

LINK

Wednesday, July 27, 2005 - POMONA - Starting with beige Apple II computers in 1988, Cindy Manufo has worked with technology at Garey High School for 17 years.

When the Pomona Unified School District spent $2.4 million in federal funds to purchase 460 high-end laptops for its teachers in 2002 violating federal funding rules the technology resource teacher and 25-year district veteran was ready to put hers to use in the classroom.

When she received her Apple G4 Powerbook, however, Manufo said it turned out to be "nothing more than a glorified DVD player."

"As soon as they introduced those laptop servers to us, I knew it was a big joke," Munafo said. "They gave them to us with no software on them whatsoever."

On July 21, David Jaramillo, Pomona Unified's director of technology, said the laptops were purchased as "classroom servers," an ineligible use of funds from E-Rate, a program to connect low-income schools to the Internet, according to federal guidelines.

The laptops, which were never used as servers, had so few capabilities that teachers weren't even using them, Manufo said.

District officials declined to comment.

Spectrum Communications of Corona charged the district $2.6 million for 460 Powerbooks, $2.4 million of which came from the E-Rate program, administered by the Schools and Libraries Division of the FCC in Washington, D.C.

Munafo said teachers could do little more than watch movies on the devices during the first six months.

"We went through a whole summer using them as nothing more than a glorified DVD player," she said.

Since 1998, the district has spent nearly $36 million in E-Rate funds to build a massive, districtwide computer network. Those laptops, along with hundreds of other items, were purchased in 2002 in violation of rules specifying how E-Rate money can be spent.

Munafo said she tapped her school's technology grant funds for $20,000 to purchase programs for the 98 laptops at Garey, so teachers could compose documents and perform other basic functions.

It would be another year before the computers could even be used to access the Internet, Munafo said.

Jaramillo defended the purchase of the laptops and said they were "classroom servers," which is still an improper use of E-Rate funds, according to the Schools and Libraries Division's rules.

Munafo said the laptops were never used that way and that Jaramillo and his technology staff prevented them from being used as servers.

"We said "Why don't you allow us to use the teachers' laptops as servers?,' " she said. "They said they didn't want them used as servers."

Invoices from Spectrum, which provided at least $6 million in products and services to Pomona in 2002, described the laptops on their invoices as "Apple servers" or "network equipment."

A Daily Bulletin investigation, the results of which first were reported Friday, unearthed millions in E-Rate misspending by the district, a good portion of it in 2002.

Spectrum also charged the district well above retail price for the equipment: $3,573 for each laptop, or nearly $600 more than the Apple retail price of $2,999 apiece.

Adding a service plan, accessories and $600 "installation" fee, Spectrum charged the district $4,940 per laptop.

That also included $559 per laptop to load them with Apple's server-class version of their OS X operating system, which is no longer on the laptops and that Munafo said was removed in summer 2003.

Schools usually pay 10 percent to 15 percent below retail for computer equipment, and even less through large competitive bids.

The school district has deep ties to Spectrum Jaramillo's brother, Joseph Jaramillo, is listed as the director of research and education at a Spectrum subsidiary, which has also counted a former Pomona assistant superintendent as its chief operating officer.

State education officials said Tuesday they have no legal authority to oversee how E-Rate money is spent, but they try to educate school districts on its proper use.

"We hear stories like Pomona that describe abuses, and other stories that tell of wonderful things being done," said Patrick McMenamin, a consultant in the state education department's education technology office. "Even if we wanted to monitor this program, we couldn't do so."

Inland Valley Daily Bulletin
Family ties in PUSD case
Tech director, E-Rate vendor worker relatedBy Kenneth Todd Ruiz
Staff Writer

LINK

Friday, July 22, 2005 - POMONA - Links between Spectrum Communications and the Pomona Unified School District run deeper than the millions of dollars -- including misspent federal money -- the company has earned doing business with the district.

Spectrum, the vendor that sold Pomona schools $2.4 million worth of laptops in 2002 in violation of a taxpayer-funded federal program, has counted a former Pomona assistant superintendent and a brother of the district's current technology director among its top employees.

In 2000, Spectrum created a subsidiary called Meshworx. Meshworx and Spectrum share the same offices and telephone number in Corona, as well as the same CEO and other officers, according to filings with the California secretary of state.

A call to Meshworx on Friday was answered by Spectrum employees.

Jerry Livesey, a former assistant superintendent for Pomona Unified, once worked for Meshworx as chief operating officer, according to the company's Web site. His present relationship with the company was unclear Friday.

Joseph Jaramillo, brother of Pomona's director of technology, David Jaramillo, is listed as Meshworx's director of research and education.

David Jaramillo's signature appears on hundreds of Spectrum invoices, including those sent to the district for 460 Apple Powerbook laptops. Nearly 90 percent of the cost of the laptops was paid with money from E-Rate, a federal program to connect low-income schools to the Internet. The other 11 percent was paid with district bond money.

Those laptops, along with hundreds of other items, were purchased from Spectrum in 2002 in violation of rules specifying how E-Rate money can be used.

While neither David Jaramillo nor Joseph Jaramillo returned phone calls seeking comment Friday, a public records search showed the two clearly are related, sharing addresses and telephone numbers in past years. Additionally, two people who wished to remain anonymous -- one a district employee, the other a former high-level district official -- confirmed the two are brothers.

All purchases were approved by the Pomona Unified school board. School board members Candelario Mendoza and Richard Rodriguez did not return calls Friday. School board member Nancy McCracken declined to answer questions.

Pomona is being audited by the federal government for its E-Rate spending in 2005, but has not been audited for prior years. A Daily Bulletin investigation, the results of which first were reported Friday, unearthed millions in E-Rate misspending by the district, a good portion of it in 2002.

Tanya Sullivan of the Universal Service Administrative Co. in Washington, D.C., which oversees E-Rate through the Schools and Libraries Division of the Federal Communications Commission, initially said her office would investigate Pomona's past E-Rate deals.

On Friday, she could no longer confirm if any such investigations are in progress or would occur.

A representative of the House Committee on Energy and Commerce, which is investigating the E-Rate program nationwide, said Friday that possible abuse in Pomona comes as no shock.

"Abuse of the E-Rate program is varied and widespread, and news of a similar case in Pomona is not a surprise," said Terry Lane, committee spokesman.

Lane said the committee would be announcing the results of its review of the national program at a later date.

Since 1998, Pomona has spent nearly $36 million in E-Rate funds to build a massive, districtwide computer network. Millions of those dollars went to Spectrum, and some items were bought at well over market value instead of with the discounting usually applied to education purchases.

Inland Valley Daily Bulletin
What is E-Rate?
Thursday, July 21, 2005

LINK

In 1996, the E-Rate program, sometimes pegged the "Gore Tax," was adopted to update a Depression Era fund to expand communications in rural areas.

Part of the 1996 Telecommunications Act, E-Rate money comes from a universal surcharge assessed to every phone bill nationwide, and was part of then-Vice President Al Gore's plan for every school in the nation to be connected to the Internet by 2000.

The program disburses $2.25 billion annually to school districts across the country from rural farming communities to the inner city.

School eligibility is based on the number of students on free and reduced-cost meal plans. Districts with a higher proportion receive greater compensation for eligible purchases, up to 90 percent.

Strict guidelines limit eligible products and services to only those which enable data to reach schools and classrooms. No personal computers -- or other items that would be used by only one person -- are eligible, and computer servers must be used as "a conduit for information rather than as a source for content."

According to the eligibility guidelines, file servers, application servers, cachings servers, firewall servers, print servers and proxy servers are not legitimate uses.

Source: Schools and Libraries Division of the Federal Communications Commission

Download .pdf file: E-Rate Eligibilty List

The E-Rate Fraud Prompts the F.C.C. to Put a Stop to the Program, Creating Hardship Around the US

Computer Technology Does Not Work in Most Schools: the Story of the E-rate Fraud

E-Rate Fraud: 40 Cases So Far in the Corruption Scandal

NEC Unit Admits School Internet Fraud

Another E-Rate Fraud, This Time In Atlanta

IBM Contracts

E-Rate

Another E-Rate Fraud. This Time It's in Indiana