Technology contract probe could cost schools millions

(Published in The Press of Atlantic City on Thursday, Dec. 18, 2008.)

The federal government has frozen about $30 million in technology funding to some of the area’s poorest school districts as it investigates the companies who worked for them.

Some New Jersey schools that could lose the funding, including Atlantic City, Pleasantville and Wildwood, have moved ahead with millions of dollars worth of technology upgrades as they await regulators’ decision. More than a dozen Philadelphia-area schools face a similar situation.

Technology consultant Martin Friedman, of Broomall, Pa., who has represented all the schools affected, did not respond Wednesday to questions about the schools’ funding or the investigation.

Federal investigators last week questioned ComTec Systems, of Vineland, about E-Rate contracts as part of an unspecified investigation.

“We were told specifically we’re not a target,” ComTec President Michael Vertolli said.

ComTec and three other vendors — Micro Technology Groupe, Final Mile Technologies and consultant Geoffrey P. Deans — have done 79 percent of their work at schools where Friedman was the consultant, according to a review of the federal E-Rate data by The Press of Atlantic City. The FCC has frozen nearly all of the funding involved with their contracts over the last two years.

E-Rate is an 11-year-old Federal Communications Commission program that funds technology improvements in poorer schools and public libraries through a telephone bill surcharge.

Since E-Rate’s launch, it has proved susceptible to fraud, leading to convictions in California, Maryland, South Carolina and other places. Many of the cases involved kickbacks in exchange for the steering of bids to favored vendors.

“The program really doesn’t have the manpower or authority to do investigations,” said New York-based E-Rate consultant Win Himsworth, a member of the Task Force on the Prevention of Waste, Fraud and Abuse for the Schools and Libraries Program.

Asbury Park has canceled most of its projects because it could not afford them. Ranch Hope for Boys in Salem County followed through on some and postponed others.

Atlantic City pulled the money from elsewhere in its budget. Pleasantville and Wildwood paid 10 percent of their total project costs upfront through Friedman in anticipation that the federal government will fund the standard 90 percent via reimbursement, according to their business administrators. If the federal government never funds those projects, however, the schools could be on the hook for the full cost.

“If E-Rate doesn’t fund them, then they’re essentially fronting all the money on these projects,” said Vertolli, whose firm handles much of Wildwood’s tech work.

Pleasantville replaced Friedman last week. Asbury Park now has an in-house technology coordinator. Several Philadelphia charter schools also replaced him in 2008.

Federal agencies have declined to confirm the specifics of the investigation.

FCC spokeswoman Edie Herman said there are several reasons the schools’ funding could be held up.

“It could be anything from a problem with the schools’ paperwork or an investigation, and if it’s an investigation, we couldn’t talk about it,” Herman said.

Atlantic City Superintendent Fred Nickles believes his district’s E-Rate funding has been held up because RelComm Technologies alleged bid-rigging on E-Rate contracts in Atlantic City in 2003.

RelComm sued the district and Friedman, alleged bid rigging and won a $1.3 million settlement that Nickles now says he regrets. Atlantic City hiked the settlement slightly so that RelComm would drop its suit against Friedman, and Friedman’s subsequent contract indicates Friedman can’t be sued for his work.

Nickles and John Jones, then the district’s technology coordinator, fought over that same contract. Jones objected to some of the proposed changes, including prospective contracts with ComTec, Nickles said Monday. Nickles questioned Jones’ handling of the district’s E-Rate grants. The district suspended Jones in February 2003 and later eliminated his position. Jones later won more than $1 million in a whistle-blower lawsuit against the district. He could not be reached for comment.

After dismissing Jones, the district hired Friedman as a consultant to handle E-Rate bids on ComTec’s recommendation, according to Nickles. Micro Technology won the $3 million bid. Atlantic City later was fined for hiring Friedman on a no-bid contract, which Nickles called a misunderstanding.

A January 2007 internal report by Cape May attorney Glenn Callahan backed RelComm’s assertions of questionable bids and found Jones should have been involved in the process.

“In my opinion,” Callahan wrote, “it was both unwise and unjustified to turn over the process to an outside individual without any internal controls or oversight by technologically competent individuals within the district.”

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Atlantic City School District

Requested:  $2,354,422

Received:     $183,299

Pleasantville School District

Requested:  $3,183,144

Received:   $0

Wildwood School District

Requested:    $501,941

Received:     $145,036

Asbury Park School District

Requested:  $6,405,670

Received:     $329,460

Ranch Hope for Boys

Requested:  $2,282,798

Received:      $36,789

Philadelphia area schools

Requested: $18,405,682

Received:      $32,069