Rhode Island Man Sentenced to Federal Prison for Defrauding Federal E-Rate Program

NEW HAVEN, Conn. – Kevin J. O’Connor, United States Attorney for the District of Connecticut, announced that Keith J. Madeiros, 41, of Westerly, Rhode Island, was sentenced today by Chief United States District Judge Robert N. Chatigny in Hartford to nine months of imprisonment, followed by three years of supervised release, the first three months of which Madeiros must spend confined to his home. On Feb. 13, 2007, Madeiros, formerly an account manager for Southwestern Bell Communications (SBC), pleaded guilty to one count of mail fraud related to a scheme to defraud the Federal Communications Commission (FCC) in connection with the E-Rate program, which provides funding to qualifying school districts nationwide to upgrade their Internet access capabilities.

To fund the E-Rate program, the FCC mandates that telecommunication companies throughout the country add surcharges to the bills of their customers that, after collected, are forwarded to the FCC. Applications by school districts are reviewed and awards to school districts are made by Universal Services Administrative Company (USAC), the FCC-designated administrator of the program. In Connecticut, the Hartford, New London, New Haven and Bridgeport school districts received E-Rate funding. Each school district selected SBC/Southern New England Telephone (SNET) as the prime contractor to perform its internet upgrades. American Networks International, Inc. (ANI) of Bristol, a company that installs telecommunication wiring, was a first-tier subcontractor to SBC/SNET.

According to documents filed with the court and statements made in court, one scheme in which Madeiros participated involved Scott Federowicz, ANI’s project manager. According to documents filed with the Court and statements made in court, in late 2002, Madeiros and Richard E. Brown, also a former SBC account manager, approached Federowicz with a proposal that he approve for payment invoices submitted by two purported second-tier subcontractors, MRB Associates (MRB) and Responsive Communications Services, Inc. (RCS). RCS was MADEIROS’ creation, and MRB was Brown’s. Each existed in name only, and neither performed any work. Initially, Federowicz agreed to do as he was asked to ensure that ANI continued to receive business from SBC/SNET. Later, he asked to be paid and received $16,917 from Madeiros and Brown.

RCS and MRB submitted to ANI sham invoices totaling $453,203, which Federowicz approved. ANI paid the invoices, unaware that no work had been performed, and Madeiros and Brown split the money. ANI invoiced SBC/SNET for these expenses, and SBC/SNET, in turn, invoiced the FCC through USAC.

Madeiros and Brown also were involved in two other schemes to defraud the E-Rate program. In one, Madeiros, Brown, Thomas J. Kennedy, III, and another individual decided that engineers would be hired for certain E-Rate funded school district projects, the costs for which would be billed first to SBC/SNET, and later to an SBC/SNET subcontractor. Kennedy, who was an account manager for a company that had a partnership arrangement with SBC/SNET, arranged for the hiring of the engineers, and also arranged for the billings to SBC/SNET and to the subcontractor for their services. However, those billings, which SBC/SNET paid and then invoiced to the FCC, were inflated by approximately $503,000. That money was split primarily among Madeiros, Brown and Kennedy, with Kennedy receiving $249,525, Madeiros receiving $129,571 and Brown receiving $78,136.

In approximately October 2003, Joseph E. Mello, a former SBC employee, became an employee of a company that was a first-tier subcontractor to SBC. Madeiros and Brown entered into an arrangement with Mello similar to the one that they had with Federowicz. Mello agreed to accept invoices submitted by Madeiros’ and Brown’s purported business and approve them for payment, resulting in his company making payment on those invoices. From Nov. 16, 2003 through Jan. 11, 2004, Madeiros submitted five RCS invoices totaling $16,193 for work allegedly performed on the New Haven school district E-Rate funded project, and RCS was paid that amount by Mello’s company.

Instead of using MRB, Brown created another fictitious business, Chariho Associates. On Jan. 2, 2004 and Feb. 2, 2004, Brown submitted eight Chariho invoices totaling $446,572 to Mello’s company for work allegedly performed on the New London and New Haven school district’s E-Rate funded projects, and Brown, through Chariho, was paid that amount.

It is not clear how the money paid to RCS was divided. However, of the $446,572 that was paid to Chariho, Brown gave Mello $175,199 and Madeiros $103,937. Brown kept $167,432 for himself.

Federowicz, Brown, Kennedy, and Mello have pleaded guilty to charges related to their involvement in these schemes. On May 3, 2007, Federowicz was sentenced to four months of imprisonment. On Aug. 29, 2007, Brown was sentenced to 27 months of imprisonment and six months of home confinement.  Kennedy and Mello await sentencing.

This case is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Calvin B. Kurimai.

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Department of Justice Dec. 7 press release

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