Prepared Statement of The Honorable Joe Barton

Problems with the E-rate Program: Waste, Fraud, and Abuse Concerns in the Wiring of Our Nation's Schools to the Internet

Subcommittee on Oversight and Investigations
July 22, 2004

Thank you, Mr. Chairman. I appreciate the work you and the Committee staff -- on both sides of the aisle -- have been doing to showcase areas of concern within this E-rate program.

This good work will help the Committee ensure that E-rate will eventually operate without the waste and abuse we've been discovering -- under almost every rock we turn over, it seems. This program deserves vigorous Congressional oversight. And I support this oversight and will look forward to each hearing you call on this topic.

These hearings are in large measure about accountability -- accountability among the applicants and recipients of funding that they are following the rules, and accountability among those running the program that they have set it up to operate effectively, with minimal waste and abuse.

The program is designed to provide recipients and applicants access to other people's money. When you spend somebody else's money you do not have the same incentive to spend as carefully as you would if you spent your own money. When tens of millions of dollars are at issue, there is powerful incentive to spend wastefully or abuse the program.

To address this powerful incentive, the solution is to ensure accountability of program participants and managers so they spend wisely and manage effectively. This hearing is about the process put in place to ensure people act responsibly or with the appropriate authority - and understand the consequences of acting irresponsibly.

Today we'll hear about a fraudulent $50-million-dollar application at the San Francisco School District that sailed through the normal process and was approved. The money was eventually rejected because one person, the new superintendent, did the responsible thing. She turned down the questionable deal, and launched an investigation.

I look forward to hearing her testimony this morning and hearing from the panelists who can explain how and where the program broke down.

We also have before us this morning people with the company, NEC Unified Solutions, who can answer to the actions of their employees. The company recently pleaded guilty to E-rate bid rigging in San Francisco and other districts and paid a $20 million fine. I would like to hear how the CEO answers for the actions of his employees.

We have an E-rate consultant who was on the ground at the school districts, who can answer to the development of what turned out to be fraudulent but successful applications for E-rate funding.

Last week, as you noted Mr. Chairman, we issued subpoenas for four witnesses. Three of them are before us today. One, a Ms. Judy Green, has successfully ducked service. I take very seriously our oversight function in the House and I will not allow people who have information necessary to accomplish our work avoid our legitimate inquiries. We will have her stand to account for her knowledge before this Committee.

Finally, we have the administrator of the program and we have the person who runs the bureau at the Federal Communications Commission that is in charge of the program. They are responsible for clear and effective rules and procedures. I look forward to hearing what they say about the issues before us this morning.

Mr. Chairman, this promises to be an instructive hearing. Let me welcome the witnesses and I yield back the remainder of my time.

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