KEVIN V. RYAN (CSBN 118321)
United States Attorney
THOMAS O. BARNETT (DCBN 426840)
Acting Assistant Attorney General
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FILED
FEB 22 2006
RICHARD W. WIEKING
CLERK U.S. DISTRICT COURT
NORTHERN
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
PREMIO, INC., f/k/a PREMIO
COMPUTER, INC.
Defendant.
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No. CR 06-0086 CRB
VIOLATIONS: 15 U.S.C. §1 - Sherman
Antitrust Act; 18 U.S.C. §§1341 and 2 -
Mail Fraud and Aiding and Abetting
PLEA AGREEMENT
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PREMIO, INC., (formerly known as PREMIO COMPUTER, INC., and hereafter,
"defendant"), a corporation organized and existing under the laws of
Illinois, with its principal place of business in the City of Industry,
California, and the United States Department of Justice, by and through
the United States Attorney's Office for the Northern District of California
and the Antitrust Division of the Department of Justice (hereafter "the
government"), enter into this written plea agreement (the "Agreement")
pursuant to Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure:
The Defendant's Promises
1. Pursuant to Rule 7(b) of the Federal Rules of Criminal Procedure,
the defendant agrees to waive Indictment and plead guilty to a two-count
felony Information charging the defendant with a conspiracy to suppress
and eliminate competition in violation of the Sherman Antitrust Act,
15 U.S.C. § 1, and with mail fraud and aiding and abetting in violation
of 18 U.S.C. §§ 1341 and 2. The defendant agrees that the
elements of the offenses and the maximum penalties are as follows:
Elements of Count One - Sherman Act Antitrust Offense:
- The conspiracy, agreement, or understanding described in the Information
was knowingly formed, and was existing at or about the time alleged;
- The defendant knowingly became a member of the conspiracy, agreement,
or understanding, as charged;
- The alleged conspiracy, agreement, or understanding constituted
an unreasonable restraint of interstate commerce; and
- The offense was carried out, in part, in the Central District of
California.
Maximum Penalties:
- Five years probation;
- A fine in the amount of $10 million or twice the loss (or gain)
from the offense, whichever is greater;
- Mandatory special assessment of $400; and
- Restitution.
Elements of Count Two - Mail Fraud:
- Defendant participated in a scheme to defraud or a plan for obtaining
money or property by making false promises or statements;
- Defendant knew that the promises or statements were false;
- The promises or statements were material;
- Defendant acted with the intent to defraud;
- Defendant used or caused to be used the mails to carry out or attempt
to carry out an essential part of the scheme; and
- The offense was carried out, in part, in the Central District of
California.
Maximum Penalties:
- Five years probation;
- A fine in the amount of $500,000 or twice the amount of loss (or
gain) from the offense, whichever is greater;
- Mandatory special assessment of $400;
- Restitution.
2. The defendant agrees that it is guilty of the offenses to which
it will plead guilty, and it agrees that the following facts are true:
FACTUAL BASIS FOR SHERMAN ACT OFFENSE CHARGED
- From at least December 1998 to approximately December 1999, (hereafter,
in this Agreement, "the relevant period") the defendant sold and installed
telecommunication equipment, including servers to be used for Internet
access. It also provided maintenance and other services as needed for
the equipment that it supplied.
- During the relevant period, E-Rate, a program authorized by Congress
in the Telecommunications Act of 1996, operated under the auspices of
the Federal Communications Commission ("FCC") to provide funding to
better enable school districts and libraries to connect to the Internet.
The FCC designated the Universal Service Administrative Company ("USAC"),
a nonprofit corporation, to administer the E-Rate program. All participating
school districts were required to fund a percentage of the cost of the
equipment and services acquired under the E-Rate program. That percentage
was determined based on the number of students in the district qualifying
for the United States Department of Agriculture's school lunch program,
with the neediest school districts eligible for the highest percentage
of funding.
- During the relevant period, applications for E-Rate funding far
exceeded the funding available. To ensure that E-Rate funding was distributed
to the widest number of applicants, USAC required all applicants to
comply with various rules and procedures including: (1) only certain
equipment and services, would be eligible for funding; (2) school districts
were required to follow both competitive bidding procedures in accordance
with local and state law and FCC rules to ensure that the school districts
received the lowest possible prices and most cost-effective proposals
from the responsive bidders; (3) service providers or their agents could
not participate in the vendor selection process or the completion of
forms necessary for the schools to receive E-Rate funding in order to
avoid a conflict of interest or even the appearance of a conflict of
interest; and (4) school districts were required to enter into contracts
with the most cost-effective, responsive bidder prior to making application
for funds from USAC.
- In or about December 1998, the defendant had established a relationship
with a company that manufactured and installed video conferencing switches
and related equipment (hereafter "VX Company").
- During the relevant period, VX Company contracted with two persons
(Consultant One and Consultant Two) to work as sales representatives.
Consultants One and Two specialized in marketing VX Company products
to educational institutions, including school districts. During the
relevant period Consultants One and Two also acted as consultants to
school districts in designing computer networks, identifying potential
government-sponsored funding sources (including the E-Rate program),
applying for those funds, and selecting vendors to supply the specified
equipment and services funded by those programs.
- During the relevant period, the defendant knowingly participated
in a conspiracy with one or more vendors of equipment and services related
to telecommunications, Internet access, and/or internal connections,
the purpose of which was to suppress and eliminate competition for the
E-Rate program project at the West Fresno Elementary School District
in Fresno, California by allocating contracts and submitting fraudulent
and noncompetitive bids (hereafter, as relates to this offense, "the
project"). The defendant's knowledge of and participation in the Count
One conspiracy, agreement or understanding was through the activities
of a single former employee of the defendant, who was acting at all
times within the course and scope of his employment with defendant,
and for defendant's benefit.
- To carry out this conspiracy, the defendant discussed prospective
bids for the E-Rate project with its co-conspirators, agreed with
those co-conspirators who would be the lead contractor on the project
and who would participate on the project as subcontractors to the
designated lead contractor, submitted a fraudulent and noncompetitive
subcontract bid in accordance with the conspiratorial agreement, and
worked with Consultants One and Two. These Consultants took steps
to ensure the conspiracy's success by disqualifying a non-conspirator's
bid and either directly awarding the contract or using their best
efforts to persuade the school district officials to award the contracts
to the designated lead contractor and subcontractors.
- As part of the conspiracy, Consultants One and Two caused the E-Rate
project's contract to be awarded to the designated lead contractor and
caused a subcontract to be awarded to the defendant. In return, pursuant
to the conspiracy, the defendant agreed to purchase and install, and
did purchase and install, equipment from other companies at the E-Rate
project.
- During the relevant period, in accordance with the E-Rate project
contract obtained through the conspiracy, equipment and services were
delivered and payments for those equipment and services were received
that traveled in interstate commerce. The business activities of the
defendant and its co-conspirators in connection with the sale of that
equipment and services affected by this conspiracy were within the flow
of, and substantially affected, interstate trade and commerce.
- Acts in furtherance of this conspiracy were carried out within the
Northern District of California. The conspiratorial meetings and discussions
described above took place in the United States, and at least one of
those communications originated or was received by a conspirator in
the Northern District of California.
FACTUAL BASIS FOR MAIL FRAUD OFFENSE CHARGED
- From at least December 1998 to approximately December 2000, (hereafter,
for the Mail Fraud charge, "the relevant period") the defendant sold
and installed telecommunication equipment, including servers to be used
for Internet access. It also provided maintenance and other services
as needed for the equipment that it supplied.
- Paragraphs (b) through (e) are realleged as if full set forth here.
- The defendant's knowledge of and participation in the Count Two
offense was through the activities of a single former employee of the
defendant, who was acting at all times within the course and scope of
his employment with defendant, and for defendant's benefit.
- In or before December 1998, Consultants One and Two began working
with the Highland Park School District (hereafter "Highland Park") to
obtain E-Rate program funds. Working with a Highland Park Official,
Consultants One and Two put together a Request for Proposal for equipment
and services to be funded by E-Rate.
- On or about February 23, 1999, the defendant submitted its bid on
the Highland Park E-Rate project. Consultant One ran the bid opening
proceedings, and together with a Highland Park Official, opened and
reviewed the bids. Consultant One declared the defendant the winner
of the telecommunication server portion of the Highland Park bid.
- On or about March 31, 1999, Consultant One prepared and submitted
Highland Park's Application Form 471 to USAC. The Form 471 is a school
district's request for E-Rate funding. It is supposed to set out the
winning vendors' bid amounts for the equipment and services called for
in the district's Request for Proposal. The Highland Park 471 included
a request for $1.4 million of telecommunication servers to be provided
by the defendant under defendant's Service Provider Information Number
("SPIN") 143008583.
- After review of the Highland Park 471 application, on or about November
2, 1999, USAC's Schools and Libraries Division ("SLD") approved approximately
$1.2 million in funding to the defendant for the defendant's providing
of telecommunication servers and related installation and maintenance
at Highland Park.
- In furtherance of this scheme, Consultants One and Two directed
a Highland Park Official to write a letter to the defendant requesting
the substitution of the ineligible video conferencing equipment for
the approved servers, when in fact the letter was merely an attempt
to hide the ineligible substitution from the SLD's scrutiny.
- Defendant's former employee met with Consultant One and agreed to
have the defendant provide ineligible video conferencing equipment with
the E-Rate funds that had been appropriated for servers and provide
that equipment to Highland Park instead of providing telecommunication
servers as approved by the SLD.
- During the relevant period, the defendant purchased the ineligible
video conferencing equipment from VX Company and delivered that equipment,
along with ineligible equipment from defendant, to Highland Park in
lieu of the servers for which funding had been approved under the defendant's
SPIN 143008583.
- The defendant knowingly invoiced the SLD for approximately $1.2
million for telecommunication servers despite having delivered the ineligible
video conferencing equipment to Highland Park.
- At no time during the relevant period did the defendant disclose
to the SLD that it had impermissibly substituted ineligible video conferencing
equipment for the servers that had been approved under the defendant's
SPIN 143008583.
- During the relevant period, for the purpose of executing its scheme,
the defendant used or caused to be used the mails to send Invoice No.
MI-041900, dated April 20, 2000, from California to the SLD in Kansas
seeking payment of $379,400 purportedly for telecommunication servers
delivered to Highland Park, when ineligible video conferencing equipment
had actually been delivered.
3. The defendant agrees to give up any defense based on venue in this
District, and agrees voluntarily to consent to the jurisdiction of the
government to prosecute this case against it in the United States District
Court for the Northern District of California. The defendant further
gives up all other rights that it would have if it chose to proceed
to trial, including the rights to a jury trial with the assistance of
an attorney; to confront and cross-examine government witnesses; to
remain silent or testify; to move to suppress evidence or raise any
other Fourth or Fifth Amendment claims; to any further discovery from
the government; and to pursue any affirmative defenses and present evidence.
4. The defendant agrees to waive the running of any statute of limitations
from December 1999 through the filing of the attached Information in
a separate letter found as Exhibit E to this Plea Agreement.
5. The defendant agrees to give up its right to appeal its conviction,
the judgment, and orders of the Court. The defendant also agrees to
waive any right it may have to appeal any sentence consistent with this
plea agreement.
6. The defendant agrees not to file any collateral attack on its conviction
or sentence, at any time in the future after it is sentenced. Nothing
in paragraphs 5 and 6, however, shall act as a bar to the defendant
perfecting any legal remedies it may otherwise have on appeal or collateral
attack respecting claims of ineffective assistance of counsel or prosecutorial
misconduct.
7. The defendant agrees not to ask the Court to withdraw its guilty
plea at any time after it is entered, unless the Court declines to accept
the sentence agreed to by the parties. Either party may withdraw from
this agreement if the Court does not accept the agreed-upon sentence
set out below.
8. The defendant understands that the Sentencing Guidelines are advisory,
not mandatory, and the Court must consider the Guidelines in effect
on the day of sentencing, unless the application of that version of
the Guidelines would violate the ex post facto clause of the
Constitution. In that event, pursuant to U.S.S.G. § 1B1.11(b)(1),
the version of the Guidelines in effect on the date of the commission
of the offense shall instead be considered, along with the other factors
set forth in 18 U.S.C. § 3553(a), in imposing sentence. The defendant
understands that the Guidelines determinations will be made by the Court
by the preponderance-of-the- evidence standard. The defendant understands
that although the Court is not ultimately bound to impose a sentence
within the applicable Guidelines range, its sentence must be reasonable
based upon consideration of all relevant sentencing factors set forth
in 18 U.S.C. § 3553(a). If acceptable to the Court, both parties
agree to waive the presentence investigation and report pursuant to
Rule 32(c)(l)(A)(ii) of the Federal Rules of Criminal Procedure. The
defendant agrees that the advisory Sentencing Guidelines should be calculated
as follows (utilizing the Guidelines effective November 1, 1999):
For Count One:
a.
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Base Offense Level (8C2.1, 8C2.3, and 2R1.1): |
10 |
b.
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Specific offense characteristics: |
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Bid Rigging (2R1.1(b)(1)):
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+1 |
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Volume of Commerce (2R1.1(d)(3))
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West Fresno bid: $1,934,000
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+2 |
c.
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Adjusted Offense Level: |
13 |
d.
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Base Fine (2R1.1(d)(1)) 20% Volume of Commerce: |
$386,800 |
e.
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Culpability Score (8C2.5(a)(b)(3)(A)): |
5+3 = 8 |
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(>200 employees and an individual within
high-level personnel participated in the offense)
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f.
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Acceptance of Responsibility: |
-2 |
g.
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Total Culpability Score: |
6 |
h.
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Minimum/Maximum Multiplier (8C2.6): |
1.20 2.40 |
i.
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Fine Range (8C2.7): |
$464,160 $928,320 |
For Count Two:
a. |
Base Offense Level (8C2.1, 8C2.3, and
2F1.1): |
6
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b. |
Specific Offense Characteristics (Loss
>$800,000): |
+11
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c. |
More than Minimal Planning: |
+2
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d. |
Adjusted Offense Level: |
19
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e. |
Base Fine (8C2.4)(a)(3) (pecuniary loss): |
$1,230,000
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f. |
Culpability Score (8C2.5)(a)(b)(3)(A): |
5+3= 8
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(>200 employees and an individual
within
high-level personnel participated in the offense) |
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g. |
Acceptance of Responsibility: |
-2
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h. |
Total Culpability Score: |
6
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i. |
Minimum/Maximum Multiplier (8C2.6): |
1.20-2.40
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j. |
Fine Range (8C2.7): |
$1,476,000- $2,952,000
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Multiple Counts
a. |
Grouping (3D1.1 (a), 3D1.2, and 3D1.3) |
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Group 1 - Mail Fraud offense level:
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Group 2 - Sherman Act offense level:
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13 |
b. |
Combined Offense Levels (3D1.4) |
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Highest Offense Level - Group 1: |
19 |
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Total Number of Units: |
1 ½ |
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Combined Offense Level: |
20 |
Fine Determination
a. |
Base Fine (8C2.4): |
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The greatest of:
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19 |
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Offense Level Fine Table (8C2.4(a)(l))
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$650,000 |
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Pecuniary Loss (8C2.4(a)(3)) and 8C2.4(b):
Greatest:
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$1,616,800
$1,616,800 |
b. |
Culpability Score (8C2.5(a)(b)(3)(A)
and 8C2.4(b)): |
5+3= 8
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(>200 employees and an individual within high-level personnel
participated in the offense)
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19 |
c. |
Acceptance of Responsibility: |
-2 |
d. |
Total Culpability Score: |
6 |
e. |
Minimum/Maximum Multiplier (8C2.6): |
1.20-2.40 |
f. |
Fine Range (8C2.7): |
$1,940,160 -$3,880,320 |
9. The defendant understands that as part of its plea and the separate
civil settlement that it will pay $400,000 in criminal fines and $1,300,000
in satisfaction of the civil settlement. The money paid in connection
with the civil settlement shall satisfy any obligation to make restitution.
(See U.S.S.G. § 8C2.9)
Criminal Fine |
$ 400,000 |
Civil Settlement and Restitution |
$1,300,000 |
Total |
$1,700,000 |
10. The parties agree that there exists no aggravating or mitigating
circumstances of a kind, or to a degree, not adequately taken into consideration
by the U.S. Sentencing Guidelines Commission in formulating the Sentencing
Guidelines that should result in a sentence outside the advisory Guidelines
range under U.S.S.G. § 5K2.0. The parties agree not to seek or
support any sentence outside the advisory Guidelines range for any reason
not set forth in this Plea Agreement. In view of all facts and circumstances
of this case, including the defendant's continuing cooperation with
the government, the parties believe that the sentence recommended is
reasonable, fair, and just in accordance with 18 U.S.C. §§
3553, 3571, and 3572.
11. Pursuant to Rule 11 (c)( 1 )(C) of the Federal Rules of Criminal
Procedure, the parties agree that an appropriate disposition of this
case is that the defendant receive the following criminal sentence:
- The defendant shall be placed on probation for a period of three
(3) years on conditions including that the defendant:
- commit no violations of federal or state law;
- comply with the terms and conditions of the civil settlement attached
as Exhibit A;
- comply with the Special Conditions of Probation attached as Exhibit
B; and
- cooperate fully with the government as set forth below.
- The government and the defendant agree that the applicable advisory
Sentencing Guidelines fine range exceeds the fine agreed to by the parties.
The government and the defendant further agree that the recommended
fine is appropriate, due to the inability of the defendant to pay a
fine greater than that agreed to without substantially jeopardizing
its continued viability, pursuant to U.S.S.G. § 8C3.3(b). Therefore,
in the interest of justice pursuant to 18 U.S.C. § 3572(d)(1) and
U.S.S.G. § 8C3.2(b), the parties agree that the $400,000 fine shall
be paid over five years (plus interest at 5%) in accordance with the
criminal fine repayment schedule attached to this Plea Agreement as
Exhibit C. All installments of the criminal fine shall be paid to the
United States District Court for the Northern District of California,
according to instructions from the Clerk's Office.
- The parties agree that the civil settlement (including restitution)
of $1,300,000 shall be paid and distributed in accordance with the civil
settlement attached as Exhibit A.
- The defendant shall comply with the Special Conditions of Probation
attached as Exhibit B to include, among other things, creating a Corporate
Compliance Program with an emphasis on public entity procurement requirements.
- On the date of sentencing, the defendant will pay a special assessment
of $800.
- The defendant will cooperate fully and truthfully with the United
States in the prosecution of this case, including the ongoing federal
investigation into allegations of fraud and collusion related to the
FCC's E-Rate program, any other federal criminal investigation resulting
therefrom, and any litigation or other proceedings arising or resulting
from any such investigation to which the government is a party ("federal
proceeding").
12. The ongoing full and truthful cooperation of the defendant shall
include, but not be limited to:
- producing to the United States all documents, information, and other
materials, wherever located, in the possession, custody, or control
of the defendant, requested by the United States in connection with
any federal proceeding; and
- using its best efforts to secure the ongoing, full, and truthful
cooperation, as defined in Paragraph 13 of this Plea Agreement, of each
current and former director, officer, or employee of the defendant as
may be requested by the United States, including making these persons
available, at the defendant's expense, for interviews and the provision
of testimony in grand jury, trial, and other judicial proceedings in
connection with any federal proceeding.
13. The ongoing full and truthful cooperation of each person described
in Paragraph 12(b) above will be subject to the procedures and protections
of this paragraph, and shall include, but not be limited to:
- producing all non-privileged documents, including claimed personal
documents, and other materials, wherever located, requested by attorneys
and agents of the United States;
- making himself or herself available for interviews, not at the expense
of the United States, upon the request of attorneys and agents of the
United States;
- responding fully and truthfully to all inquiries of the United States
in connection with any federal proceeding, without falsely implicating
any person or intentionally withholding any information, subject to
the penalties of making false statements (18 U.S.C. § 1001) and
obstruction of justice (18 U.S.C. § 1503), and otherwise voluntarily
providing the United States with any material or information not requested
in (a) - (c) of this paragraph that he or she may have that is related
to any federal proceeding; and
- when called upon to do so by the United States in connection with
any federal proceeding, to testify fully, truthfully, and under oath
before a grand jury, in trial, and in connection with any other ancillary
judicial proceedings pursuant to subpoena, subject to the penalties
of perjury (18 U.S.C. § 1621), making false statements or declarations
in front of the grand jury or in court proceedings (18 U.S.C. §
1623), contempt (18 U.S.C. §§ 401-402), and obstruction of
justice (18 U.S.C. § 1503).
14. The defendant understands and agrees that, should it or the government
withdraw from this Agreement in accordance with Paragraph 7, the defendant
may thereafter be prosecuted for any criminal violation of which the
government has knowledge, notwithstanding the expiration of any applicable
statute of limitations following the signing of this Agreement.
15. The defendant agrees not to intentionally provide false information
to the Court, the Probation Office, Pretrial Services, or the government;
or fail to comply with any of the other promises it has made in this
Agreement. The defendant agrees not to commit or attempt to commit any
crimes before sentence is imposed. The defendant agrees that, if it
fails to comply with any promises it has made in this Agreement, then
the government will be released from all of its promises in this Agreement,
including those set forth in paragraphs 17 through 19 below, but the
defendant will not be released from its guilty pleas.
16. The defendant agrees that this Agreement and the attached Exhibits
A, B, C and E contain all of the promises and agreements between it
and the government, and it will not claim otherwise in the future.
17. The defendant agrees that this Agreement binds the United States
Department of Justice, excepting the Tax Division, only, and does not
bind any other federal, state, or local agency.
The Government's Promises
18. The government agrees not to file or seek any additional charges
against the defendant that could be filed as a result of information
known to the government that arises out of the investigation into collusion
and fraud that led to the captioned Information, or arose out of the
defendant's participation in the E-Rate program from 1998 to the date
of sentencing in school districts including, but not limited to, Highland
Park, Michigan; West Fresno, California; and Los Angeles, California.
forth in Paragraph 9 above, unless the defendant violates the terms
and conditions of this Agreement.
20. The government agrees that, if requested, it will advise the appropriate
officials of any governmental agency considering any administrative
action of the fact, manner, and extent of the cooperation of the defendant
as a matter for that agency to consider before determining what administrative
action, if any, to take.
The Defendant's Affirmations
21. The defendant confirms that it has had adequate time to discuss
this case, the evidence, and this Agreement with its attorney, and that
its attorney has provided it with all the legal advice that it requested.
22. This Agreement has been authorized, following consultation with
counsel, by the Board of Directors of the defendant, by corporate resolution
dated February 6, 2006. A certified copy of the corporate resolution
is attached to this Agreement as Exhibit D and is incorporated herein.
The defendant confirms that its decision to enter guilty pleas is made
knowing the charges that have been brought against it, any possible
defenses, and the benefits and possible detriments of proceeding to
trial. The defendant also confirms that its decision to plead guilty
is made voluntarily. Except as set forth in this plea agreement, the
defendant has received no promises or inducements to enter its guilty
plea, nor has anyone threatened it or any other person to cause it to
enter its guilty plea.
DATED: 2/22/06 |
_______________/s/________________
TOM TSAO
Vice-President, Defendant
Premio, Inc. f/k/a Premio Computer, Inc. |
DATED: 2/21/06
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_______________/s/________________
EUMI L. CHOI (WVBN 0722)
Chief, Criminal Division |
DATED: 2/22/06
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_______________/s/________________
MICHAEL F. WOOD
RICHARD B. COHEN
BRIAN J. STACK
VICTOR ALI
Attorneys, U.S. Department of Justice
Antitrust Division |
I have fully explained to my client all the rights that a criminal
defendant has and all the terms of this Agreement. In my opinion, my
client understands all the terms of this Agreement and all the rights
it is giving up by pleading guilty, and, based on the information now
known to me, its decision to plead guilty is knowing and voluntary.
DATED: 2/22/06
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_______________/s/________________
PAUL J. LOH
Willenken, Wilson, Loh and Lieb, LLP
Attorneys for Defendant
Premio, Inc., f/k/a Premio Computer, Inc. |
EXHIBIT A TO PLEA AGREEMENT
CIVIL SETTLEMENT
SETTLEMENT AGREEMENT
I. PARTIES
This Settlement Agreement (Agreement) is entered into by the United
States of America, acting through the United States Department of Justice
and on behalf of the Federal Communications Commission (FCC), including
the Universal Service Administrative Company (USAC), the entity that
administers the E-rate program for the FCC (collectively, the United
States); and Premio, Inc., formerly Premio Computer, Inc., through their
authorized representatives. Premio, Inc. and Premio Computer, Inc.,
together with their successors and assigns, are hereinafter referred
to as Premio. The parties listed in this Paragraph are hereinafter collectively
referred to as the Parties.
II. PREAMBLE
As a preamble to this Agreement, the Parties agree to the following:
A. Premio is a corporation organized and existing under the laws of
Illinois with its principal place of business in California. Prior to
January 1, 2006, Premio was known as Premio Computer, Inc. Premio does
business in California, among other states. Premio does not operate
as a common carrier.
B. E-Rate is a program created by Congress in the Telecommunications
Act of 1996 and administered by USAC for the FCC. Under E-Rate, the
FCC typically reimburses providers of internet access, internal connections
services, and telecommunications services for discounts that they provide
to schools and libraries that purchase these services. The FCC utilizes
USAC, a not for profit corporation incorporated in Delaware, to administer
the E-Rate program.
C. Premio is entering a plea of guilty to a two-count felony Information
charging Premio with participating in an agreement, understanding, or
conspiracy to suppress and eliminate competition in violation of the
Sherman Antitrust Act, 15 U.S.C. § 1, and mail fraud in violation
of 18 U.S.C. §§ 1341 and 2, in connection with Premio's participation
in the E-rate program. The guilty plea is being entered in a matter
captioned United States of America v. Premio Computer, Inc. No.
CR 06-0086 (filed in the Northern District of California, February 8,
2006). A copy of the plea agreement in that matter is attached hereto
as Exhibit A (hereinafter the Plea Agreement).
D. The United States contends that it has certain civil claims against
Premio under the False Claims Act (FCA), 31 U.S.C. §§ 3729-33,
and under the common law for Premio's conduct (while known as Premio
Computer, Inc.) in submitting and causing to be submitted false claims
for payment under the E-rate program from approximately July 1, 1998
to June 30, 2000 with respect to work at Highland Park School District,
Michigan and West Fresno Elementary School District, California by:
(1) engaging in non-competitive bidding practices; (2) claiming and
receiving E-rate funds for goods and services that were ineligible for
E-rate funding; (3) providing false information to the United States
regarding the goods and services that were provided to schools and school
districts under the E-rate program; and (4) inflating prices on invoices
and other documents provided to the United States to conceal some or
all of the practices listed in this Paragraph. The conduct described
in this Paragraph is hereinafter referred to as the Covered Conduct.
E. This Agreement is not an admission of any liability by Premio.
F. To avoid the delay, uncertainty, inconvenience, and expense of protracted
litigation of the above claims, the Parties reach a full and final settlement
pursuant to the terms and conditions of this Agreement.
III. TERMS AND CONDITIONS
1. Premio agrees to pay to the United States $1,300,000 (hereinafter
referred to as the Settlement Amount) by electronic funds transfer pursuant
to written instructions to be provided by the United States Attorney's
Office for the Northern District of California, as follows:
- Within five calendar days of the date on which the United States
District Court for the Northern District of California (District Court)
imposes sentence on Premio in accordance with the Plea Agreement, Premio
will pay the United States the amount of $260,000; and
- The balance of the Settlement Amount ($1,040,000), together with
accrued interest computed at the rate of five percent per annum on the
unpaid balance hereof, from the date of this Settlement Agreement until
the date the entire balance including accrued interest has been paid
in full, will be paid in quarterly installments (Installment Payments).
The Installment Payments will be made according to the following schedule:
- $59,093.21 on or before April 1, 2006;
- $59,093.21 on or before July 1, 2006;
- $59,093.21 on or before October 1, 2006;
- $59,093.21 on or before January 1, 2007;
- $59,093.21 on or before April 1, 2007;
- $59,093.21 on or before July 1, 2007;
- $59,093.21 on or before October 1, 2007;
- $59,093.21 on or before January 1, 2008;
- $59,093.21 on or before April 1, 2008;
- $59,093.21 on or before July 1, 2008;
- $59,093.21 on or before October 1, 2008;
- $59,093.21 on or before January 1, 2009;
- $59,093.21 on or before April 1, 2009;
- $59,093.21 on or before July 1, 2009;
- $59,093.21 on or before October 1, 2009;
- $59,093.21 on or before January 1, 2010;
- $59,093.21 on or before April 1, 2010;
- $59,093.21 on or before July 1, 2010;
- $59,093.21 on or before October 1, 2010; and
- $59,093.10 on or before January 1, 2011.
In the event that the balance of the Settlement Amount is accelerated
as described in Paragraph 3 below, the entire unpaid balance shall bear
interest at the rate of seven percent per annum until paid.
2. Premio's shareholders, Crystal Ai Lan Wu, Tom K. Tsao, and Fu Yin
Szeto, have each executed a Guarantee to ensure payment of the Settlement
Amount, together with interest as set forth in Paragraph 1. Copies of
the executed Guarantees are attached hereto as Exhibits B, C, and D
and are incorporated into this Agreement by reference.
3. If Premio fails to make any payment in the amount specified above
in Paragraph 1 within five (5) calendar days of the date specified above
in Paragraph 1, such failure is an event of default, the result of which
is that the unpaid balance of the Settlement Amount, plus all unpaid
interest accrued thereon, together with any late fee(s) and/or administrative
charges (as permitted pursuant to federal law), plus the costs of collection,
litigation, and attorney's fees, shall all become immediately due and
payable, without notice, presentment, demand, protest, or notice of
protest of any kind, all of which are waived by Premio, and the United
States may, at its option, (a) collect the entire unpaid balance of
the Settlement Amount immediately, as well as interest and all other
amounts due upon an event of default as specified in this Paragraph
3, including seven percent interest from the date of default, whether
by suing Premio or collecting on the Guarantees (attached at Exhibits
B, C, and/or D) or both; and/or (b) file a civil action against Premio
for the Covered Conduct. In the event a complaint is filed pursuant
to subsection b of this Paragraph, Premio agrees that it will not plead,
argue or otherwise raise any defenses under the theories of statute
of limitations, laches, estoppel or similar theories, to the allegations
in the complaint, except to the extent such defenses were available
on June 20, 2005.
4. In the event that the District Court does not accept the Plea Agreement,
and/or does not impose the sentence agreed to in the Plea Agreement,
the United States or Premio may, each in its respective discretion,
within five (5) calendar days of the Court's dispositive action on the
Plea Agreement, declare this Agreement null and void by written notice
to the other party.
5. Premio agrees to cooperate with the United States in any investigation
or litigation related to the E-rate program.
6. Releases:
- Premio fully and finally releases the United States, together with
its respective agencies, employees, servants, and agents, from any claims
(including attorney's fees, costs, and expenses of every kind and however
denominated) which Premio has asserted, could have asserted, or may assert
in the future against the United States, its agencies, employees, servants,
and agents, related to the Covered Conduct, the Information, the Plea
Agreement, and the investigation and prosecution thereof.
- Subject to the reservations and exclusions in Paragraph 7 below,
in consideration of the obligations and promises of Premio set forth
in this Agreement, and conditioned upon Premio's full payment of the
Settlement Amount, together with all accrued interest as provided herein:
- the United States (on behalf of itself, its officers, agents, agencies,
and departments) agrees to fully and finally release Premio and any
affiliates, subsidiaries, or parent corporations, and their predecessors,
successors, and assigns; and any of their present or former directors,
officers, and employees, from any civil or administrative monetary claim
the United States has or may have for the Covered Conduct under the
False Claims Act, 31 U.S.C. §§ 3729-3733; the Program Fraud
Civil Remedies Act, 31 U.S.C. §§ 3801-3812; or the common
law theories of payment by mistake, unjust enrichment, disgorgement,
restitution, recoupment, breach of contract, and fraud; and
- the FCC (on behalf of itself, its officers, employees, and agents,
and on behalf of USAC) agrees to release Premio and any affiliates,
subsidiaries, or parent corporations, and their predecessors, successors,
and assigns, and any of their present or former directors, officers,
and employees, from any administrative monetary claims the FCC has or
may have for the Covered Conduct.
7. Notwithstanding any term of this Agreement, specifically reserved
and excluded from the scope and terms of this Agreement as to any entity
or person (including Premio) are the following claims: (a) any civil,
criminal, or administrative liability to the United States arising under
Title 26, U.S. Code (Internal Revenue Code); (b) any criminal liability;
(c) any process or proceeding, administrative or judicial, for any agency
suspension or debarment action; (d) any liability to the United States
(or its agencies) for any conduct other than the Covered Conduct; (e)
any claims of the United States based upon such obligations as are created
by this Agreement; (f) any liability for the delivery of any deficient
or defective products/services (including any products or services provided
as part of the Covered Conduct), including liability under any express
or implied product/service liability warranties not related to whether
the products/services were eligible for E-Rate funding; and (g) any
civil or administrative claims of the United States against individuals,
including but not limited to present or former directors, officers,
and employees of Premio and any affiliates, subsidiaries, and parent
corporations, and their predecessors, successors, and assigns who are
criminally indicted or charged, or are convicted, or who enter into
a criminal plea agreement related to the Covered Conduct.
8. Premio waives and shall not assert, in any criminal prosecution
or administrative action relating to the Covered Conduct, any defenses
that may be based in whole or in part on a contention that, under the
Double Jeopardy Clause in the Fifth Amendment of the Constitution, or
under the Excessive Fines Clause in the Eighth Amendment of the Constitution,
this Agreement bars a remedy sought in such criminal prosecution or
administrative action. Nothing in this Paragraph or any other provision
of this Agreement constitutes an agreement by the United States concerning
the characterization of the Settlement Amount for purposes of the Internal
Revenue Laws, Title 26 of the United States Code.
9. Premio agrees that all costs (as defined by Federal Acquisition
Regulation 31.205-47) incurred by or on behalf of Premio in connection
with (a) the matters covered by this Agreement; (b) the Government's
audits and investigations of the matters covered by this Agreement;
(c) Premio's investigation, defense of the matters, and corrective actions
relating to the Covered Conduct; (d) the negotiation of this Agreement;
and (e) the payments made to the United States pursuant to this Agreement,
shall be unallowable costs for government accounting purposes. Premio
shall separately account for all costs that are unallowable under this
Agreement.
10. This Agreement is intended to be for the benefit of the Parties
only. Except as expressly stated in Paragraph 6 above, the Parties do
not release any claims against any other person or entity.
11. Premio expressly warrants that it has reviewed its financial condition
and that it is currently solvent within the meaning of 11 U.S.C. §§
547(b)(3) and 548(a)(1)(B)(ii)(I), and shall remain solvent following
payment of the Settlement Amount. Premio further warrants that it has
or will have access to sufficient assets to pay the Settlement Amount.
Further, the Parties expressly warrant that, in evaluating whether to
execute this Agreement, the Parties (a) have intended that the mutual
promises, covenants, and obligations set forth herein constitute a contemporaneous
exchange for new value given to Premio within the meaning of 11 U.S.C.
§ 547(c)(1), and (b) have concluded that these mutual promises,
covenants, and obligations do, in fact, constitute such a contemporaneous
exchange. Further, the Parties warrant that the mutual promises, covenants,
and obligations set forth herein are intended to and do, in fact, represent
a reasonably equivalent exchange of value which is not intended to hinder,
delay, or defraud any entity to which Premio was or became indebted
on or after the date of this transfer, all within the meaning of 11
U.S.C. § 548(a)(1).
12. Premio agrees that this Agreement satisfies the requirements of
the citation provision under subsections 503(b)(5)(A)-(B) of the Communications
Act of 1934, as amended, 47 U.S.C. § 503(b)(5)(A)-(B), such that
the FCC may issue a Notice of Apparent Liability against Premio pursuant
to 47 U.S.C. § 503(b)(4) if, after the Effective Date of this Agreement
(as defined in Paragraph 20), Premio engages in conduct of the type
described in Paragraph D of this Agreement.
13. The Parties shall each bear their own legal and other costs incurred
in connection with this matter, including the preparation and performance
of this Agreement.
14. All Parties represent that this Agreement is freely and voluntarily
entered into without any degree of duress or compulsion whatsoever.
15. This Agreement is governed by the laws of the United States. The
Parties agree that the exclusive jurisdiction and venue for any dispute
arising between the Parties under this Agreement shall be the United
States District Court for the Northern District of California.
16. This Agreement constitutes the complete agreement between the Parties
with respect to civil and administrative monetary liability for the
Covered Conduct. This Agreement may not be amended except in writing
signed by the Parties.
17. The individuals signing this Agreement on behalf of Premio represent
and warrant that they are authorized by Premio to execute this Agreement.
The United States signatories represent that they are signing this Agreement
in their official capacities and that they are authorized to execute
this Agreement.
18. This Agreement may be executed in counterparts, each of which constitutes
an original and all of which constitute one and the same agreement.
19. This Agreement is binding on Premio's successors, transferees,
heirs, and assigns.
20. This Agreement is effective on the date of signature of the last
signatory to the Agreement (Effective Date). Facsimiles of signatures
shall constitute acceptable, binding signatures for purposes of this
Agreement.
THE UNITED STATES OF AMERICA
|
PETER D. KEISLER
Assistant Attorney General |
DATED: Feb. 2, 2006
|
BY: _____________/s/_____________
ALICIA J. BENTLEY
Trial Attorney
Commercial Litigation Branch
Civil Division
U.S. Department of Justice
KEVIN V. RYAN
United States Attorney
Northern District of California
|
DATED: 2/22/06
|
BY: _____________/s/_____________
SARA WINSLOW
Assistant United States Attorney
On behalf of the United States and the
Federal Communications Commission |
PREMIO, INC.
DATED: 2/10/06
|
BY: _____________/s/_____________
TOM K. TSAO, Vice President
On behalf of Premio, Inc.
WILLENKEN WILSON
LOH & LIEB LLP
|
DATED: 2/13/06
|
BY: _____________/s/_____________
PAUL J. LOH
Attorney for Premio, Inc. |
EXHIBIT A TO
SETTLEMENT AGREEMENT
KEVIN V. RYAN (CSBN 118321)
United States Attorney
THOMAS O. BARNETT (DCBN 426840)
Acting Assistant Attorney General
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
PREMIO, INC., f/k/a PREMIO
COMPUTER, INC.
Defendant.
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No. CR 06-0086 CRB
VIOLATIONS: 15 U.S.C. §1 - Sherman
Antitrust Act; 18 U.S.C. §§1341 and 2 -
Mail Fraud and Aiding and Abetting
PLEA AGREEMENT
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PREMIO, INC., (formerly known as PREMIO COMPUTER, INC., and hereafter,
"defendant"), a corporation organized and existing under the laws of
Illinois, with its principal place of business in the City of Industry,
California, and the United States Department of Justice, by and through
the United States Attorney's Office for the Northern District of California
and the Antitrust Division of the Department of Justice (hereafter "the
government"), enter into this written plea agreement (the "Agreement")
pursuant to Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure:
The Defendant's Promises
1. Pursuant to Rule 7(b) of the Federal Rules of Criminal Procedure,
the defendant agrees to waive Indictment and plead guilty to a two-count
felony Information charging the defendant with a conspiracy to suppress
and eliminate competition in violation of the Sherman Antitrust Act,
15 U.S.C. § 1, and with mail fraud and aiding and abetting in violation
of 18 U.S.C. §§ 1341 and 2. The defendant agrees that the
elements of the offenses and the maximum penalties are as follows:
Elements of Count One - Sherman Act Antitrust Offense:
- The conspiracy, agreement, or understanding described in the Information
was knowingly formed, and was existing at or about the time alleged;
- The defendant knowingly became a member of the conspiracy, agreement,
or understanding, as charged;
- The alleged conspiracy, agreement, or understanding constituted
an unreasonable restraint of interstate commerce; and
- The offense was carried out, in part, in the Central District of
California.
Maximum Penalties:
- Five years probation;
- A fine in the amount of $10 million or twice the loss (or gain)
from the offense, whichever is greater;
- Mandatory special assessment of $400; and
- Restitution.
Elements of Count Two - Mail Fraud:
- Defendant participated in a scheme to defraud or a plan for obtaining
money or property by making false promises or statements;
- Defendant knew that the promises or statements were false;
- The promises or statements were material;
- Defendant acted with the intent to defraud;
- Defendant used or caused to be used the mails to carry out or attempt
to carry out an essential part of the scheme; and
- The offense was carried out, in part, in the Central District of
California.
Maximum Penalties:
- Five years probation;
- A fine in the amount of $500,000 or twice the amount of loss (or
gain) from the offense, whichever is greater;
- Mandatory special assessment of $400;
- Restitution.
2. The defendant agrees that it is guilty of the offenses to which
it will plead guilty, and it agrees that the following facts are true:
FACTUAL BASIS FOR SHERMAN ACT OFFENSE CHARGED
- From at least December 1998 to approximately December 1999, (hereafter,
in this Agreement, "the relevant period") the defendant sold and installed
telecommunication equipment, including servers to be used for Internet
access. It also provided maintenance and other services as needed
for the equipment that it supplied.
- During the relevant period, E-Rate, a program authorized by Congress
in the Telecommunications Act of 1996, operated under the auspices
of the Federal Communications Commission ("FCC") to provide funding
to better enable school districts and libraries to connect to the
Internet. The FCC designated the Universal Service Administrative
Company ("USAC"), a nonprofit corporation, to administer the E-Rate
program. All participating school districts were required to fund
a percentage of the cost of the equipment and services acquired under
the E-Rate program. That percentage was determined based on the number
of students in the district qualifying for the United States Department
of Agriculture's school lunch program, with the neediest school districts
eligible for the highest percentage of funding.
- During the relevant period, applications for E-Rate funding far
exceeded the funding available. To ensure that E-Rate funding was
distributed to the widest number of applicants, USAC required all
applicants to comply with various rules and procedures including:
(1) only certain equipment and services, would be eligible for funding;
(2) school districts were required to follow both competitive bidding
procedures in accordance with local and state law and FCC rules to
ensure that the school districts received the lowest possible prices
and most cost-effective proposals from the responsive bidders; (3)
service providers or their agents could not participate in the vendor
selection process or the completion of forms necessary for the schools
to receive E-Rate funding in order to avoid a conflict of interest
or even the appearance of a conflict of interest; and (4) school districts
were required to enter into contracts with the most cost-effective,
responsive bidder prior to making application for funds from USAC.
- In or about December 1998, the defendant had established a relationship
with a company that manufactured and installed video conferencing
switches and related equipment (hereafter "VX Company").
- During the relevant period, VX Company contracted with two persons
(Consultant One and Consultant Two) to work as sales representatives.
Consultants One and Two specialized in marketing VX Company products
to educational institutions, including school districts. During the
relevant period Consultants One and Two also acted as consultants
to school districts in designing computer networks, identifying potential
government-sponsored funding sources (including the E-Rate program),
applying for those funds, and selecting vendors to supply the specified
equipment and services funded by those programs.
- During the relevant period, the defendant knowingly participated
in a conspiracy with one or more vendors of equipment and services
related to telecommunications, Internet access, and/or internal connections,
the purpose of which was to suppress and eliminate competition for
the E-Rate program project at the West Fresno Elementary School District
in Fresno, California by allocating contracts and submitting fraudulent
and noncompetitive bids (hereafter, as relates to this offense, "the
project"). The defendant's knowledge of and participation in the Count
One conspiracy, agreement or understanding was through the activities
of a single former employee of the defendant, who was acting at all
times within the course and scope of his employment with defendant,
and for defendant's benefit.
- To carry out this conspiracy, the defendant discussed prospective
bids for the E-Rate project with its co-conspirators, agreed with
those co-conspirators who would be the lead contractor on the project
and who would participate on the project as subcontractors to the
designated lead contractor, submitted a fraudulent and noncompetitive
subcontract bid in accordance with the conspiratorial agreement, and
worked with Consultants One and Two. These Consultants took steps
to ensure the conspiracy's success by disqualifying a non-conspirator's
bid and either directly awarding the contract or using their best
efforts to persuade the school district officials to award the contracts
to the designated lead contractor and subcontractors.
- As part of the conspiracy, Consultants One and Two caused the E-Rate
project's contract to be awarded to the designated lead contractor
and caused a subcontract to be awarded to the defendant. In return,
pursuant to the conspiracy, the defendant agreed to purchase and install,
and did purchase and install, equipment from other companies at the
E-Rate project.
- During the relevant period, in accordance with the E-Rate project
contract obtained through the conspiracy, equipment and services were
delivered and payments for those equipment and services were received
that traveled in interstate commerce. The business activities of the
defendant and its co-conspirators in connection with the sale of that
equipment and services affected by this conspiracy were within the
flow of, and substantially affected, interstate trade and commerce.
- Acts in furtherance of this conspiracy were carried out within
the Northern District of California. The conspiratorial meetings and
discussions described above took place in the United States, and at
least one of those communications originated or was received by a
conspirator in the Northern District of California.
FACTUAL BASIS FOR MAIL FRAUD OFFENSE
CHARGED
- From at least December 1998 to approximately December 2000, (hereafter,
for the Mail Fraud charge, "the relevant period") the defendant sold
and installed telecommunication equipment, including servers to be
used for Internet access. It also provided maintenance and other services
as needed for the equipment that it supplied.
- Paragraphs (b) through (e) are realleged as if full set forth here.
- The defendant's knowledge of and participation in the Count Two
offense was through the activities of a single former employee of
the defendant, who was acting at all times within the course and scope
of his employment with defendant, and for defendant's benefit.
- In or before December 1998, Consultants One and Two began working
with the Highland Park School District (hereafter "Highland Park")
to obtain E-Rate program funds. Working with a Highland Park Official,
Consultants One and Two put together a Request for Proposal for equipment
and services to be funded by E-Rate.
- On or about February 23, 1999, the defendant submitted its bid
on the Highland Park E-Rate project. Consultant One ran the bid opening
proceedings, and together with a Highland Park Official, opened and
reviewed the bids. Consultant One declared the defendant the winner
of the telecommunication server portion of the Highland Park bid.
- On or about March 31, 1999, Consultant One prepared and submitted
Highland Park's Application Form 471 to USAC. The Form 471 is a school
district's request for E-Rate funding. It is supposed to set out the
winning vendors' bid amounts for the equipment and services called
for in the district's Request for Proposal. The Highland Park 471
included a request for $1.4 million of telecommunication servers to
be provided by the defendant under defendant's Service Provider Information
Number ("SPIN") 143008583.
- After review of the Highland Park 471 application, on or about
November 2, 1999, USAC's Schools and Libraries Division ("SLD") approved
approximately $1.2 million in funding to the defendant for the defendant's
providing of telecommunication servers and related installation and
maintenance at Highland Park.
- In furtherance of this scheme, Consultants One and Two directed
a Highland Park Official to write a letter to the defendant requesting
the substitution of the ineligible video conferencing equipment for
the approved servers, when in fact the letter was merely an attempt
to hide the ineligible substitution from the SLD's scrutiny.
- Defendant's former employee met with Consultant One and agreed
to have the defendant provide ineligible video conferencing equipment
with the E-Rate funds that had been appropriated for servers and provide
that equipment to Highland Park instead of providing telecommunication
servers as approved by the SLD.
- During the relevant period, the defendant purchased the ineligible
video conferencing equipment from VX Company and delivered that equipment,
along with ineligible equipment from defendant, to Highland Park in
lieu of the servers for which funding had been approved under the
defendant's SPIN 143008583.
- The defendant knowingly invoiced the SLD for approximately $1.2
million for telecommunication servers despite having delivered the
ineligible video conferencing equipment to Highland Park.
- At no time during the relevant period did the defendant disclose
to the SLD that it had impermissibly substituted ineligible video
conferencing equipment for the servers that had been approved under
the defendant's SPIN 143008583.
- During the relevant period, for the purpose of executing its scheme,
the defendant used or caused to be used the mails to send Invoice
No. MI-041900, dated April 20, 2000, from California to the SLD in
Kansas seeking payment of $379,400 purportedly for telecommunication
servers delivered to Highland Park, when ineligible video conferencing
equipment had actually been delivered.
3. The defendant agrees to give up any defense based on venue in this
District, and agrees voluntarily to consent to the jurisdiction of the
government to prosecute this case against it in the United States District
Court for the Northern District of California. The defendant further
gives up all other rights that it would have if it chose to proceed
to trial, including the rights to a jury trial with the assistance of
an attorney; to confront and cross-examine government witnesses; to
remain silent or testify; to move to suppress evidence or raise any
other Fourth or Fifth Amendment claims; to any further discovery from
the government; and to pursue any affirmative defenses and present evidence.
4. The defendant agrees to waive the running of any statute of limitations
from December 1999 through the filing of the attached Information in
a separate letter found as Exhibit E to this Plea Agreement.
5. The defendant agrees to give up its right to appeal its conviction,
the judgment, and orders of the Court. The defendant also agrees to
waive any right it may have to appeal any sentence consistent with this
plea agreement.
6. The defendant agrees not to file any collateral attack on its conviction
or sentence, at any time in the future after it is sentenced. Nothing
in paragraphs 5 and 6, however, shall act as a bar to the defendant
perfecting any legal remedies it may otherwise have on appeal or collateral
attack respecting claims of ineffective assistance of counsel or prosecutorial
misconduct.
7. The defendant agrees not to ask the Court to withdraw its guilty
plea at any time after it is entered, unless the Court declines to accept
the sentence agreed to by the parties. Either party may withdraw from
this agreement if the Court does not accept the agreed-upon sentence
set out below.
8. The defendant understands that the Sentencing Guidelines are advisory,
not mandatory, and the Court must consider the Guidelines in effect
on the day of sentencing, unless the application of that version of
the Guidelines would violate the ex post facto clause of the
Constitution. In that event, pursuant to U.S.S.G. § 1B1.11(b)(1),
the version of the Guidelines in effect on the date of the commission
of the offense shall instead be considered, along with the other factors
set forth in 18 U.S.C. § 3553(a), in imposing sentence. The defendant
understands that the Guidelines determinations will be made by the Court
by the preponderance-of-the- evidence standard. The defendant understands
that although the Court is not ultimately bound to impose a sentence
within the applicable Guidelines range, its sentence must be reasonable
based upon consideration of all relevant sentencing factors set forth
in 18 U.S.C. § 3553(a). If acceptable to the Court, both parties
agree to waive the presentence investigation and report pursuant to
Rule 32(c)(l)(A)(ii) of the Federal Rules of Criminal Procedure. The
defendant agrees that the advisory Sentencing Guidelines should be calculated
as follows (utilizing the Guidelines effective November 1, 1999):
For Count One:
a.
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Base Offense Level (8C2.1, 8C2.3, and 2R1.1): |
10 |
b.
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Specific offense characteristics: |
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Bid Rigging (2R1.1(b)(1)):
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+1 |
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Volume of Commerce (2R1.1(d)(3))
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West Fresno bid: $1,934,000
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+2 |
c.
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Adjusted Offense Level: |
13 |
d.
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Base Fine (2R1.1(d)(1)) 20% Volume of Commerce: |
$386,800 |
e.
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Culpability Score (8C2.5(a)(b)(3)(A)): |
5+3 = 8 |
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(>200 employees and an individual within
high-level personnel participated in the offense)
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f.
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Acceptance of Responsibility: |
-2 |
g.
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Total Culpability Score: |
6 |
h.
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Minimum/Maximum Multiplier (8C2.6): |
1.20 2.40 |
i.
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Fine Range (8C2.7): |
$464,160 $928,320 |
For Count Two:
a. |
Base Offense Level (8C2.1, 8C2.3, and
2F1.1): |
6
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b. |
Specific Offense Characteristics (Loss
>$800,000): |
+11
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c. |
More than Minimal Planning: |
+2
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d. |
Adjusted Offense Level: |
19
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e. |
Base Fine (8C2.4)(a)(3) (pecuniary loss): |
$1,230,000
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f. |
Culpability Score (8C2.5)(a)(b)(3)(A): |
5+3= 8
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(>200 employees and an individual within
high-level personnel participated in the offense)
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g. |
Acceptance of Responsibility: |
-2
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h. |
Total Culpability Score: |
6
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i. |
Minimum/Maximum Multiplier (8C2.6): |
1.20-2.40
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j. |
Fine Range (8C2.7): |
$1,476,000- $2,952,000
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Multiple Counts
a. |
Grouping (3D1.1 (a), 3D1.2, and 3D1.3) |
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Group 1 - Mail Fraud offense level:
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19 |
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Group 2 - Sherman Act offense level:
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13 |
b. |
Combined Offense Levels (3D1.4) |
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Highest Offense Level - Group 1:
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19 |
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Total Number of Units:
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1 ½ |
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Combined Offense Level:
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20 |
Fine Determination
a. |
Base Fine (8C2.4): |
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The greatest of:
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Offense Level Fine Table (8C2.4(a)(l))
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$650,000 |
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Pecuniary Loss (8C2.4(a)(3)) and 8C2.4(b):
Greatest:
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$1,616,800
$1,616,800 |
b. |
Culpability Score (8C2.5(a)(b)(3)(A)
and 8C2.4(b)): |
5+3= 8
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(>200 employees and an individual within
high-level personnel participated in the offense)
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19 |
c. |
Acceptance of Responsibility: |
-2 |
d. |
Total Culpability Score: |
6 |
e. |
Minimum/Maximum Multiplier (8C2.6): |
1.20-2.40 |
f. |
Fine Range (8C2.7): |
$1,940,160 -$3,880,320 |
9. The defendant understands that as part of its plea and the separate
civil settlement that it will pay $400,000 in criminal fines and $1,300,000
in satisfaction of the civil settlement. The money paid in connection
with the civil settlement shall satisfy any obligation to make restitution.
(See U.S.S.G. § 8C2.9)
Criminal Fine |
$ 400,000 |
Civil Settlement and Restitution |
$1,300,000 |
Total |
$1,700,000 |
10. The parties agree that there exists no aggravating or mitigating
circumstances of a kind, or to a degree, not adequately taken into consideration
by the U.S. Sentencing Guidelines Commission in formulating the Sentencing
Guidelines that should result in a sentence outside the advisory Guidelines
range under U.S.S.G. § 5K2.0. The parties agree not to seek or
support any sentence outside the advisory Guidelines range for any reason
not set forth in this Plea Agreement. In view of all facts and circumstances
of this case, including the defendant's continuing cooperation with
the government, the parties believe that the sentence recommended is
reasonable, fair, and just in accordance with 18 U.S.C. §§
3553, 3571, and 3572.
11. Pursuant to Rule 11 (c)( 1 )(C) of the Federal Rules of Criminal
Procedure, the parties agree that an appropriate disposition of this
case is that the defendant receive the following criminal sentence:
- The defendant shall be placed on probation for a period of three
(3) years on conditions including that the defendant:
- commit no violations of federal or state law;
- comply with the terms and conditions of the civil settlement
attached as Exhibit A;
- comply with the Special Conditions of Probation attached as
Exhibit B; and
- cooperate fully with the government as set forth below.
- The government and the defendant agree that the applicable advisory
Sentencing Guidelines fine range exceeds the fine agreed to by the
parties. The government and the defendant further agree that the recommended
fine is appropriate, due to the inability of the defendant to pay
a fine greater than that agreed to without substantially jeopardizing
its continued viability, pursuant to U.S.S.G. § 8C3.3(b). Therefore,
in the interest of justice pursuant to 18 U.S.C. § 3572(d)(1)
and U.S.S.G. § 8C3.2(b), the parties agree that the $400,000
fine shall be paid over five years (plus interest at 5%) in accordance
with the criminal fine repayment schedule attached to this Plea Agreement
as Exhibit C. All installments of the criminal fine shall be paid
to the United States District Court for the Northern District of California,
according to instructions from the Clerk's Office.
- The parties agree that the civil settlement (including restitution)
of $1,300,000 shall be paid and distributed in accordance with the
civil settlement attached as Exhibit A.
- The defendant shall comply with the Special Conditions of Probation
attached as Exhibit B to include, among other things, creating a Corporate
Compliance Program with an emphasis on public entity procurement requirements.
- On the date of sentencing, the defendant will pay a special assessment
of $800.
- The defendant will cooperate fully and truthfully with the United
States in the prosecution of this case, including the ongoing federal
investigation into allegations of fraud and collusion related to the
FCC's E-Rate program, any other federal criminal investigation resulting
therefrom, and any litigation or other proceedings arising or resulting
from any such investigation to which the government is a party ("federal
proceeding").
12. The ongoing full and truthful cooperation of the defendant shall
include, but not be limited to:
- producing to the United States all documents, information, and
other materials, wherever located, in the possession, custody, or
control of the defendant, requested by the United States in connection
with any federal proceeding; and
- using its best efforts to secure the ongoing, full, and truthful
cooperation, as defined in Paragraph 13 of this Plea Agreement, of
each current and former director, officer, or employee of the defendant
as may be requested by the United States, including making these persons
available, at the defendant's expense, for interviews and the provision
of testimony in grand jury, trial, and other judicial proceedings
in connection with any federal proceeding.
13. The ongoing full and truthful cooperation of each person described
in Paragraph 12(b) above will be subject to the procedures and protections
of this paragraph, and shall include, but not be limited to:
- producing all non-privileged documents, including claimed personal
documents, and other materials, wherever located, requested by attorneys
and agents of the United States;
- making himself or herself available for interviews, not at the
expense of the United States, upon the request of attorneys and agents
of the United States;
- responding fully and truthfully to all inquiries of the United
States in connection with any federal proceeding, without falsely
implicating any person or intentionally withholding any information,
subject to the penalties of making false statements (18 U.S.C. §
1001) and obstruction of justice (18 U.S.C. § 1503), and otherwise
voluntarily providing the United States with any material or information
not requested in (a) - (c) of this paragraph that he or she may have
that is related to any federal proceeding; and
- when called upon to do so by the United States in connection with
any federal proceeding, to testify fully, truthfully, and under oath
before a grand jury, in trial, and in connection with any other ancillary
judicial proceedings pursuant to subpoena, subject to the penalties
of perjury (18 U.S.C. § 1621), making false statements or declarations
in front of the grand jury or in court proceedings (18 U.S.C. §
1623), contempt (18 U.S.C. §§ 401-402), and obstruction
of justice (18 U.S.C. § 1503).
14. The defendant understands and agrees that, should it or the government
withdraw from this Agreement in accordance with Paragraph 7, the defendant
may thereafter be prosecuted for any criminal violation of which the
government has knowledge, notwithstanding the expiration of any applicable
statute of limitations following the signing of this Agreement.
15. The defendant agrees not to intentionally provide false information
to the Court, the Probation Office, Pretrial Services, or the government;
or fail to comply with any of the other promises it has made in this
Agreement. The defendant agrees not to commit or attempt to commit any
crimes before sentence is imposed. The defendant agrees that, if it
fails to comply with any promises it has made in this Agreement, then
the government will be released from all of its promises in this Agreement,
including those set forth in paragraphs 17 through 19 below, but the
defendant will not be released from its guilty pleas.
16. The defendant agrees that this Agreement and the attached Exhibits
A, B, C and E contain all of the promises and agreements between it
and the government, and it will not claim otherwise in the future.
17. The defendant agrees that this Agreement binds the United States
Department of Justice, excepting the Tax Division, only, and does not
bind any other federal, state, or local agency.
The Government's Promises
18. The government agrees not to file or seek any additional charges
against the defendant that could be filed as a result of information
known to the government that arises out of the investigation into collusion
and fraud that led to the captioned Information, or arose out of the
defendant's participation in the E-Rate program from 1998 to the date
of sentencing in school districts including, but not limited to, Highland
Park, Michigan; West Fresno, California; and Los Angeles, California.
forth in Paragraph 9 above, unless the defendant violates the terms
and conditions of this Agreement.
20. The government agrees that, if requested, it will advise the appropriate
officials of any governmental agency considering any administrative
action of the fact, manner, and extent of the cooperation of the defendant
as a matter for that agency to consider before determining what administrative
action, if any, to take.
The Defendant's Affirmations
21. The defendant confirms that it has had adequate time to discuss
this case, the evidence, and this Agreement with its attorney, and that
its attorney has provided it with all the legal advice that it requested.
22. This Agreement has been authorized, following consultation with
counsel, by the Board of Directors of the defendant, by corporate resolution
dated February 6, 2006. A certified copy of the corporate resolution
is attached to this Agreement as Exhibit D and is incorporated herein.
The defendant confirms that its decision to enter guilty pleas is made
knowing the charges that have been brought against it, any possible
defenses, and the benefits and possible detriments of proceeding to
trial. The defendant also confirms that its decision to plead guilty
is made voluntarily. Except as set forth in this plea agreement, the
defendant has received no promises or inducements to enter its guilty
plea, nor has anyone threatened it or any other person to cause it to
enter its guilty plea.
DATED: 2/22/06 |
_______________/s/________________
TOM TSAO
Vice-President, Defendant
Premio, Inc. f/k/a Premio Computer, Inc. |
DATED: 2/21/06
|
_______________/s/________________
EUMI L. CHOI (WVBN 0722)
Chief, Criminal Division |
DATED: 2/22/06
|
_______________/s/________________
MICHAEL F. WOOD
RICHARD B. COHEN
BRIAN J. STACK
VICTOR ALI
Attorneys, U.S. Department of Justice
Antitrust Division |
I have fully explained to my client all the rights that a criminal
defendant has and all the terms of this Agreement. In my opinion, my
client understands all the terms of this Agreement and all the rights
it is giving up by pleading guilty, and, based on the information now
known to me, its decision to plead guilty is knowing and voluntary.
DATED: 2/22/06
|
_______________/s/________________
PAUL J. LOH
Willenken, Wilson, Loh and Lieb, LLP
Attorneys for Defendant
Premio, Inc., f/k/a Premio Computer, Inc. |
EXHIBIT B TO
SETTLEMENT AGREEMENT
GUARANTEE
I, Crystal Ai Lan Wu, a shareholder of Premio, Inc., formerly Premio
Computer, Inc. (hereinafter Premio), hereby acknowledge Premio's indebtedness
to the United States of America in the amount of $1,300,000, together
with interest as more fully set forth in the Settlement Agreement between
the United States of America and Premio, a copy of which is attached
hereto as Exhibit A (the Settlement Agreement). I recognize the benefits
that Premio is obtaining from the Settlement Agreement, and that such
benefits inure to me as a shareholder. Accordingly, I hereby unconditionally
and irrevocably guarantee to the United States the prompt and complete
payment and performance by Premio when due (by acceleration or otherwise)
of the amount of $1,300,000 plus accrued interest.
If I do not make payment of the full outstanding balance (including
interest) due within ten (10) days of receipt of notice to me from the
United States, the United States may proceed against me in my individual
capacity to immediately enforce collection of the entire amount then
due and owing to the United States, plus interest and the costs of collection
(including reasonable attorney's fees), by filing a law suit or by any
other legal methods available. In such event, I agree to be jointly
and severally liable for the entire amount then due and owing, plus
interest and costs thereof. I waive promptness, diligence, protest,
presentment, notice of acceptance and, except as expressly provided
herein, any and all notices of any kind and any requirement that the
United States exhaust any right or take any action against any other
person or entity or collateral.
I agree that the exclusive jurisdiction and venue for any dispute arising
between the United States and me with respect to this Guarantee or the
Settlement Agreement shall be the United States District Court for the
Northern District of California, and that any such dispute will be governed
by and interpreted in accordance with the laws of the United States.
I will indemnify the United States against all losses, costs and expenses
incurred in connection with the enforcement of this Guarantee against
me.
DATED: 2/10/06
|
BY: _____________/s/_____________
CRYSTAL AI LAN WU |
APPROVED:
WILLENKEN WILSON LOH & LIEB LLP
BY: _____________/s/_____________
PAUL J. LOH, ESQ.
Attorney for Premio, Inc.,
Crystal Ai Lan Wu, Tom K. Tsao, and Fu Yin Szeto
KEVIN V. RYAN
United States Attorney
Northern District of California
BY: _____________/s/_____________
SARA WINSLOW
Assistant United States Attorney
EXHIBIT C TO
SETTLEMENT AGREEMENT
GUARANTEE
I, Tom K. Tsao, a shareholder of Premio, Inc., formerly Premio Computer,
Inc. (hereinafter Premio), hereby acknowledge Premio's indebtedness
to the United States of America in the amount of $1,300,000, together
with interest as more fully set forth in the Settlement Agreement between
the United States of America and Premio, a copy of which is attached
hereto as Exhibit A (the Settlement Agreement). I recognize the benefits
that Premio is obtaining from the Settlement Agreement, and that such
benefits inure to me as a shareholder. Accordingly, I hereby unconditionally
and irrevocably guarantee to the United States the prompt and complete
payment and performance by Premio when due (by acceleration or otherwise)
of the amount of $1,300,000 plus accrued interest.
If I do not make payment of the full outstanding balance (including
interest) due within ten (10) days of receipt of notice to me from the
United States, the United States may proceed against me in my individual
capacity to immediately enforce collection of the entire amount then
due and owing to the United States, plus interest and the costs of collection
(including reasonable attorney's fees), by filing a law suit or by any
other legal methods available. In such event, I agree to be jointly
and severally liable for the entire amount then due and owing, plus
interest and costs thereof. I waive promptness, diligence, protest,
presentment, notice of acceptance and, except as expressly provided
herein, any and all notices of any kind and any requirement that the
United States exhaust any right or take any action against any other
person or entity or collateral.
I agree that the exclusive jurisdiction and venue for any dispute arising
between the United States and me with respect to this Guarantee or the
Settlement Agreement shall be the United States District Court for the
Northern District of California, and that any such dispute will be governed
by and interpreted in accordance with the laws of the United States.
I will indemnify the United States against all losses, costs and expenses
incurred in connection with the enforcement of this Guarantee against
me.
DATED: 2/10/06
|
BY: _____________/s/_____________
TOM K. TSAO |
APPROVED:
WILLENKEN WILSON LOH & LIEB LLP
BY: _____________/s/_____________
PAUL J. LOH, ESQ.
Attorney for Premio, Inc.,
Crystal Ai Lan Wu, Tom K. Tsao, and Fu Yin Szeto
KEVIN V. RYAN
United States Attorney
Northern District of California
BY: _____________/s/_____________
SARA WINSLOW
Assistant United States Attorney
EXHIBIT D TO
SETTLEMENT AGREEMENT
GUARANTEE
I, Fu Yin Szeto, a shareholder of Premio, Inc., formerly Premio Computer,
Inc. (hereinafter Premio), hereby acknowledge Premio's indebtedness
to the United States of America in the amount of $1,300,000, together
with interest as more fully set forth in the Settlement Agreement between
the United States of America and Premio, a copy of which is attached
hereto as Exhibit A (the Settlement Agreement). I recognize the benefits
that Premio is obtaining from the Settlement Agreement, and that such
benefits inure to me as a shareholder. Accordingly, I hereby unconditionally
and irrevocably guarantee to the United States the prompt and complete
payment and performance by Premio when due (by acceleration or otherwise)
of the amount of $1,300,000 plus accrued interest.
If I do not make payment of the full outstanding balance (including
interest) due within ten (10) days of receipt of notice to me from the
United States, the United States may proceed against me in my individual
capacity to immediately enforce collection of the entire amount then
due and owing to the United States, plus interest and the costs of collection
(including reasonable attorney's fees), by filing a law suit or by any
other legal methods available. In such event, I agree to be jointly
and severally liable for the entire amount then due and owing, plus
interest and costs thereof. I waive promptness, diligence, protest,
presentment, notice of acceptance and, except as expressly provided
herein, any and all notices of any kind and any requirement that the
United States exhaust any right or take any action against any other
person or entity or collateral.
I agree that the exclusive jurisdiction and venue for any dispute arising
between the United States and me with respect to this Guarantee or the
Settlement Agreement shall be the United States District Court for the
Northern District of California, and that any such dispute will be governed
by and interpreted in accordance with the laws of the United States.
I will indemnify the United States against all losses, costs and expenses
incurred in connection with the enforcement of this Guarantee against
me.
DATED: 2/10/2006
|
BY: _____________/s/_____________
FU YIN SZETO |
APPROVED:
WILLENKEN WILSON LOH & LIEB LLP
BY: _____________/s/_____________
PAUL J. LOH, ESQ.
Attorney for Premio, Inc.,
Crystal Ai Lan Wu, Tom K. Tsao, and Fu Yin Szeto
KEVIN V.RYAN
United States Attorney
Northern District of California
BY: _____________/s/_____________
SARA WINSLOW
Assistant United States Attorney
EXHIBIT B TO PLEA AGREEMENT
SPECIAL CONDITIONS OF PROBATION
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
PREMIO, INC., f/k/a PREMIO
COMPUTER, INC.
Defendant.
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Case No.
SPECIAL CONDITIONS OF PROBATION
|
The defendant, Premio, Inc., (formerly known as Premio Computer, Inc.,
and hereafter, "Premio" or "defendant"), a corporation organized under
the laws of Illinois with its principal place of business in City of
Industry, California, makes and sells its computers, servers, software
and peripheral equipment to wholesale, commercial and government clients.
Premio also provides maintenance and other services as needed for the
equipment it supplies. The defendant offered and sold the products and
services to schools within the United States pursuant to a program operated
under the auspices of the Federal Communications Commission (the "FCC")
and administered by the Universal Service Administrative Company ("USAC").
The program, commonly referred to as the E-Rate program, was created
by Congress to permit schools and libraries to acquire the needed technology
to access and utilize the Internet. The defendant became the subject
of a grand jury investigation arising out of doing business related
to the E-Rate program. After having cooperated in the investigation
and seeking a mutually agreeable settlement of all claims related thereto,
the defendant has entered into a plea agreement with the United States
in which the defendant pleaded guilty to a two-count felony Information.
Count One charges the defendant with conspiracy to suppress and eliminate
competition in violation of the Sherman Antitrust Act, 15 U.S.C. §
1. Count Two charges the defendant with mail fraud and aiding and abetting
in violation of 18 U.S.C. § 1341 and 2. These charges result from
the defendant conspiring with others to frustrate the public bidding
process under the E-Rate program and submitting false and misleading
information to the Schools and Library Division of USAC ("SLD") in order
to receive funding for products and services not authorized under the
E-Rate program. To address the issues raised in the plea agreement concerning
its conduct, and having determined that the following conditions will
constitute reasonable and necessary steps to avoid the reoccurrence
of the conduct which was the subject of the plea agreement, the defendant
agrees, and the Court hereby imposes the following as a special condition
of probation for the entire three-year term of probation. In so doing,
the Court is not in any way limiting the authority of any agency of
the United States to take any action permitted by law or regulation.
- Within sixty (60) days of acceptance of the plea agreement by the
Court, the defendant shall formally adopt a comprehensive Anti-Fraud
and Antitrust Compliance Policy (the "Compliance Policy") and shall
provide copies of said policy to the Probation Officer, FCC Enforcement
Bureau and the FCC-OIG. At a minimum, the Compliance Policy will address
the following:
- Creating an internal structure requiring high level management
oversight of all government and public entity business;
- Creating an internal system of monitoring and audits to include
steps to be taken if any employee suspects that any bid, proposal
or other company conduct is not in accordance with the company's
Compliance Policy and/or applicable law;
- Educating and training all responsible employees about their
obligations, including government procurement law, regulations
and procedures; criminal and civil penalties for mail fraud, wire
fraud, false statements, obstruction of justice, and false claims
and other related conduct; and the requirements for adherence
to the antitrust laws; and
- Ensuring that there are regular reports to the CEO and Board
of Directors and, if Premio participates or attempts to participate
in the E-Rate program during the probation period, at least annual
reports to the FCC Enforcement Bureau and FCC-OIG of Compliance
Policy activities.
- Within sixty (60) days of acceptance of the plea agreement by the
Court, the defendant shall designate an officer of the defendant to
be the Compliance Officer responsible for the enforcement of the Anti-Fraud
and Antitrust Compliance Policy. This shall include:
- Creating and overseeing internal policies and procedures to
ensure that all company activities involving government-sponsored
or funded programs or any other business with any public entities
is conducted in accordance with applicable law;
- Ensuring that either the Compliance Officer personally or someone
under his/her direct supervision is an experienced contract manager
knowledgeable about governmental laws and regulations relating
to public sector procurement;
- Requiring the Compliance Officer and those under his/her direct
supervision to oversee the enforcement of the Anti-Fraud and Antitrust
Compliance Policy as it applies to all company activities involving
government-sponsored or funded programs or any other business
with any public entities;
- Creating and overseeing an ongoing mandatory education and
training program for all officers, directors, sales, technical
staff and other employees directly involved in the preparation
of bid and related contractual materials for any government-sponsored
or funded programs or any other business with any public entities
in order to apprise them of all governmental laws and regulations
relating to public sector procurement and the requirements of
the Compliance Policy. If Premio participates or attempts to participate
in the E-Rate program during the probation period, the Compliance
Officer shall ensure and certify under penalty of perjury that
all affected individuals have received such training on at least
a yearly basis and shall provide the certification to the Probation
Officer, FCC Enforcement Bureau and FCC-OIG.
- If Premio participates or attempts to participate in the E-Rate
program during the probation period, the Compliance Officer shall
be the central point of contact for (a) documenting and distributing
E-Rate program requirements throughout the company; (b) monitoring
changes in the E-Rate rules and regulations to ensure the documentation
and distribution of such changes; (c) ensuring that all employees
who are involved with the E-Rate program receive training; (d)
arranging monthly meetings with key company executives to ensure
consistent implementation of the E-Rate rules and regulations
across the company.
- The Compliance Officer's salary and other compensation, as well
as the salary and other compensation of any employees under the Compliance
Officer's supervision, shall be independent of any contracts or other
government-sponsored or funded programs or other public entity business.
- The Compliance Officer shall create and oversee an internal auditing
program in which all public sector contracts shall be audited to ensure
compliance with the Compliance Program to include that bids, prices
and design specifications are appropriate and that there are no hidden
terms, side agreements or other undisclosed arrangement; and that
all bids and pricing have been done in accordance with all applicable
laws and procedures.
- The Compliance Officer shall create, oversee and promote an internal
voicemail or email hotline system in which all employees are encouraged
to report, on an anonymous basis, any believed violation of law by
any officer or employee.
- The Compliance Officer shall be responsible for monitoring the internal
hotline system and undertaking all reasonable and necessary investigations
arising from any reported matter(s).
- The Compliance Officer shall, on at least a quarterly basis, report
to the defendant's CEO and Audit Committee as to the enforcement of
the Compliance Policy and the various measures called for herein including
the status of any anonymous complaints or reports received from any
employees.
- On at least an annual basis, the Compliance Officer shall make a
report to the full Board of Directors as to the status of the Compliance
Policy and the various measures called for herein. If Premio participates
or attempts to participate in the E-Rate program during the probation
period, the annual reports shall also be provided to the Probation
Officer, FCC Enforcement Bureau and FCC-OIG.
- The Compliance Officer shall meet regularly (at least monthly) with
key executives in the following business units to ensure compliance
with all applicable internal company rules and regulations and all
E-Rate or other telecommunication program requirements: accounting,
finance, installations (i.e. service technicians), legal, marketing,
and sales.
- If Premio participates or attempts to participate in the E-Rate
program during the probation period, prior to submitting any bid or
application for any E-Rate funded project:
- The Compliance Officer shall prepare and distribute a written
training program to be used in formal training of Premio's employees
involved in the E-Rate program, including employees involved in
accounting, finance, sales, marketing, and installations. Among
other things, this training program shall cover the following subject
matters: the application process, competitive bidding, eligible
services, service provider role and responsibilities, discounts,
service substitutions and equipment transfers, billing SLD for services,
document retention requirements, and risk of non-compliance. All
employees who are involved in the E-Rate program must certify their
completion of the training program. All future employees involved
with the E-Rate program must certify their completion of the training
program. All future employees involved with the E-Rate program shall
receive such training and shall certify completion of the training
program within 14 days of the date on which such individuals are
appointed or hired to such positions. These employee certifications
must be collected and maintained by the Compliance Officer for a
period of five (5) years.
- The Compliance Officer shall establish an E-Rate Code of Conduct
("Code"), which will conform to this Corporate Compliance Plan and
which will be signed by all employees involved with the E-Rate program.
All subject employees shall reaffirm annually, in writing, that
they have reviewed, fully understand, and will adhere to the Code.
- The Compliance Officer shall inform all employees involved with
the E-Rate program that any violation of the E-Rate Code shall be
grounds for disciplinary action to include warning, censure, reprimand,
suspension, loss of pay and firing depending on the severity of
the violation and the repetitive nature of the misconduct.
- The Compliance Officer shall review all company bids in response
to Form 471 Applications. For each bid, the Compliance Officer will
certify that all E-Rate rules and regulations were followed in preparing
the bid and all related contractual materials. Such certifications
must be maintained by the Compliance Officer for a period of five
(5) years.
- The Compliance Officer shall collect Form 471 Applications from
each customer or prospective customer. The Compliance Officer or his/her
designee shall perform a reconciliation for each Form 471 Application
to the company's responsive bid and to the resulting contract or business
agreement. The Compliance Officer shall keep a copy of the resulting
reconciliation worksheet for each application and shall update it
as necessary to show any exchanges, substitutions, or cancellations.
The Compliance Officer shall maintain these reconciliation worksheets
for a period of five (5) years.
- The Company shall separate all E-Rate eligible and ineligible products
and service onto separate customer contracts per installation.
- In addition to any applicable FCC regulation or program requirement,
and as a condition of any future participation in the E-Rate program
or other government- sponsored or funded telecommunication programs,
the defendant agrees that the FCC Enforcement Bureau and FCC-OIG,
acting directly or through its agents, may, on an annual basis, audit
defendant's compliance with applicable laws and regulations relating
to the E-Rate or other government sponsored or funded telecommunication
programs to assure adherence to the terms and conditions of those
programs. Defendant shall bear all ordinary and reasonable costs of
any such audit(s).
- On an at least annual basis, within thirty (30) days after the close
of defendant's fiscal year, the defendant shall file a report signed
under the penalty of perjury by the CEO with the FCC Enforcement Bureau
and FCC-OIG concerning the defendant's compliance with the Compliance
Policy. This report shall certify that all required oversight, training
and educational activities have been undertaken in accordance with
the requirements of the Compliance Policy. In the alternative, the
report shall detail any shortcomings in following the Compliance Policy
and the steps taken, and those that will be taken, to ensure compliance.
This report shall also include a detailed description of any violations
that were found during the applicable period, the steps taken to cure
the violations and any subsequent steps taken to ensure future compliance.
- The defendant agrees that should it fail to provide the reports
required herein on a timely basis, it shall be responsible for liquidated
damages to the United States in the amount of $25,000 per day until
the report is received by the FCC Enforcement Bureau and FCC-OIG.
The FCC Enforcement Bureau and FCC- OIG may require the defendant
to provide additional information as necessary concerning any incidents
or other activities contained in the annual report. If the defendant
materially fails to provide such information within the time requested
or within ten (10) days of such request, whichever is longer, the
defendant agrees that it will continue to be liable for liquidated
damages in the amount of $25,000 per day until such information is
provided to the satisfaction of the FCC Enforcement Bureau and FCC-OIG.
- If all or substantially all of the defendant's assets are transferred
to a successor organization, that entity shall, as a condition of
purchase and by operation of law, become subject to the terms of these
special conditions of probation. Prior to any sale, dissolution, reorganization,
assignment, merger, acquisition or other action that would result
in a successor or assign for provision of the company's E-Rate-related
services, the company will furnish a copy of this compliance plan
to such prospective successor or assigns and advise same of their
duties and obligations under the compliance plan.
IT IS SO ORDERED.
Dated: february 22, 2006
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_______________/s/_______________
HONORABLE CHARLES R. BREYER
United States District Court Judge |
EXHIBIT C TO PLEA AGREEMENT
CRIMINAL FINE REPAYMENT SCHEDULE
Time
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Criminal Amt Owing
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Interest @ 5%
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Total Payment |
Balance
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Settlement Date |
$400,000.00 |
$0.00 |
$80,000.00 |
$320,000.00 |
4/1/06 |
$320,000.00 |
$4,000.00 |
$18,182.52 |
$305,817.48 |
7/1/06 |
$305,817.48 |
$3,822.72 |
$18,182.52 |
$291,457.68 |
10/1/06 |
$291,457.68 |
$3,643.22 |
$18,182.52 |
$276,918.38 |
1/1/07 |
$276,918.38 |
$3,461.48 |
$18,182.52 |
$262,197.34 |
4/1/07 |
$262,197.34 |
$3,277.47 |
$18,182.52 |
$247,292.29 |
7/1/07 |
$247,292.29 |
$3,091.15 |
$18,182.52 |
$232,200.92 |
10/1/07 |
$232,200.92 |
$2,902.51 |
$18,182.52 |
$216,920.91 |
1/1/08 |
$216,920.91 |
$2,711.51 |
$18,182.52 |
$201,449.90 |
4/1/08 |
$201,449.90 |
$2,518.12 |
$18,182.52 |
$185,785.51 |
7/1/08 |
$185,785.51 |
$2,322.32 |
$18,182.52 |
$169,925.31 |
10/1/08 |
$169,925.31 |
$2,124.07 |
$18,182.52 |
$153,866.85 |
1/1/09 |
$153,866.85 |
$1,923.34 |
$18,182.52 |
$137,607.67 |
4/1/09 |
$137,607.67 |
$1,720.10 |
$18,182.52 |
$121,145.24 |
7/1/09 |
$121,145.24 |
$1,514.32 |
$18,182.52 |
$104,477.04 |
10/1/09 |
$104,477.04 |
$1,305.96 |
$18,182.52 |
$87,600.48 |
1/1/10 |
$87,600.48 |
$1,095.01 |
$18,182.52 |
$70,512.97 |
4/1/10 |
$70,512.97 |
$881.41 |
$18,182.52 |
$53,211.86 |
7/1/10 |
$53,211.86 |
$665.15 |
$18,182.52 |
$35,694.49 |
10/1/10 |
$35,694.49 |
$446.18 |
$18,182.52 |
$17,958.15 |
1/1/11 |
$17,958.15 |
$224.48 |
$18,182.63 |
$0.00 |
|
|
$43,650.51 |
$443,650.51 |
|
Interest Compounded Quarterly |
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|
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EXHIBIT D TO PLEA AGREEMENT
CORPORATE RESOLUTION
UNANIMOUS WRITTEN CONSENT OF BOARD OF DIRECTORS
IN LIEU OF MEETING
OF
PREMIO, INC.
(formerly known as PREMIO COMPUTER, INC.),
An Illinois Corporation
The undersigned, constituting all of the directors of Premio, Inc.
(formerly known as "Premio Computer, Inc."), an Illinois corporation
(the "Corporation"), do hereby consent to the adoption of the following
resolutions:
Plea Agreement
WHEREAS, the Corporation is the defendant in a case filed, or to be
filed, in United States District Court for the Northern District of
California San Francisco Division by plaintiff The United States of
America (the "Complaint").
WHEREAS, a settlement of the Complaint has been proposed pursuant to
a plea agreement (the "Plea Agreement") substantially in the form attached
hereto as Exhibit A, which provides for, among other things, the execution
and delivery of a civil Settlement Agreement (the "Settlement Agreement")
substantially in the form attached hereto as Exhibit B, which Settlement
Agreement is to be guaranteed by certain shareholders of the Corporation
who will execute Guarantees substantially in the forms attached hereto
as Exhibits C, D and E (collectively, the "Shareholder Guarantees").
Each of the following shareholders will execute and deliver Shareholder
Guarantees: Ai-Lan (Crystal) Wu, Tom K. Tsao, and Fu Yin Szeto (collectively,
the "Guarantors"). The Plea Agreement, the Settlement Agreement and
the Shareholder Guarantees are referred to collectively herein as the
"Settlement Documents."
WHEREAS, the shareholders of the Corporation have approved, authorized
and adopted the settlement as set forth in the Settlement Documents.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors determines
that settlement of the Complaint on the terms set forth in the Settlement
Documents is in the best interests of the Corporation and its shareholders.
RESOLVED, FURTHER, that the Plea Agreement in substantially the form
attached hereto as Exhibit A be and hereby is approved, authorized and
adopted.
RESOLVED, FURTHER, that the Settlement Agreement in substantially the
form attached hereto as Exhibit B be and hereby is approved, authorized
and adopted.
RESOLVED, FURTHER, that the Personal Guarantees in substantially the
forms attached hereto as Exhibits C, D and E be and they hereby are
approved, authorized and adopted.
RESOLVED, FURTHER, that the officers of the Corporation, and each of
them, be and they hereby are authorized and directed to execute, deliver
and perform the Settlement Documents, together with such other documents,
agreements, instruments or documents to be filed with the court as may
be required to effect the settlement of the Complaint as described in
the Settlement Documents.
RESOLVED, FURTHER, that Tom K. Tsao, be and hereby is, authorized and
directed to execute and deliver the Settlement Documents, together with
such other documents, agreements, or instruments as may be required
to effect the settlement of the Complaint as described in the Settlement
Documents, and is authorized, empowered and directed to take any other
actions, including appearance in court on behalf of the Corporation,
as may be necessary to carry out the purpose and intent of the Settlement
Documents and the foregoing resolutions.
RESOLVED, FURTHER, that the officers and directors of the Corporation,
and each of them, be and they hereby are authorized, empowered and directed
to take any other actions necessary to carry out the purpose and intent
of the Settlement Documents and the foregoing resolutions, including
the execution, acknowledgment, and filings of any documents, certificates,
writings, or book entries that may be required to carry out the terms
of the foregoing resolutions.
This consent may be executed in counterparts, each of which shall be
deemed an original, but all of which shall together shall constitute
one and the same instrument.
IN WETNESS WHEREOF, the undersigned have executed this Unanimous Written
Consent of Board of Directors in Lieu of Meeting as of February 6,
2006, pursuant to the authority granted by Section 8.45 of the
Illinois Business Corporation Act and the Bylaws of the Corporation.
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_______________/s/_______________
Ai-Lan (Crystal) Wu
_______________/s/_______________
Tom K. Tsao
_______________/s/_______________
Ai-Lu (Kevin) Wu
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Exhibit A
Plea Agreement
Exhibit B
Settlement Agreement
Exhibit C
Shareholder Guaranty - Ai-Lan Wu
Exhibit D
Shareholder Guaranty - Tom K. Tsao
Exhibit E
Shareholder Guaranty - Fu Yin Szeto
EXHIBIT E TO PLEA AGREEMENT
STATUTE WAIVER
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
PREMIO COMPUTER,
Defendant.
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No.
VIOLATIONS: 15 U.S.C. §1 and
18 U.S.C. §§1341 and 2 -
Mail Fraud and Aiding and Abetting
SAN FRANCISCO VENUE
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WAIVER OF STATUTE OF LIMITATIONS
Premio Computer, the above-named Defendant, which has agreed to enter
into the attached Information and Plea Agreement, wherein it agrees
to plead guilty to a conspiracy to suppress competition related to the
FCC's E-Rate program in violation of the Sherman Antitrust Act, 15 U.S.C.
§1, and a scheme and artifice to defraud the FCC's E-Rate program
in violation of the Mail Fraud and Aiding and Abetting statutes, 18
U.S.C. §§ 1341 and 2, hereby waives the running of any statute
of limitations from December 31, 1999, through the filing of the attached
Information. Accordingly, as to any action by the United States pursuant
to 15 U.S.C. §1 and 18 U.S.C. §§ 1341 and 2, the period
of time from December 31, 1999, through the filing of the attached Information,
shall not be included for the purpose of determining the statute of
limitations, the doctrines of waiver, laches, or estoppel, the applicability
of Federal Rule of Criminal Procedure 48, or any statutory or constitutional
right to a speedy trial or to the absence of pre-indictment delay.
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_______________/s/_______________
Crystal Wu
President, Defendant Premio Computer,
Inc.
_______________/s/_______________
Paul J. Loh
Willenken, Wilson, Loh and Stris, LLP,
Attorneys fro Defendant Premio
Computer, Inc.
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DATE: 11/21/05
ATTACHMENT TO PLEA AGREEMENT
SUMMARY ANALYSIS OF PREMIO'S
FINANCIAL CONDITION
SUMMARY OF DEPARTMENT OF JUSTICE'S
ANALYSIS OF PREMIO'S FINANCIAL CONDITION
In 2005, Department of Justice personnel reviewed Premio's financial
situation, including sworn financial statements and tax returns provided
by Premio. Based on this review, DOJ determined that Premio was able
to pay a total amount of $1.7 million over a five-year period. This
amount represents about 25 percent of the company's net worth. The specific
findings and conclusions of DOJ's review are summarized below.
Our review determined that in 2004, the company realized a net profit
of only $8,477, and that Premio has been marginally profitable for the
past several years and has not been able to increase sales volume to
make up for its low margins. Premio's financial condition has been hampered
by its marginal level of profits. During March 2005, Premio increased
its cash position to approximately $850,000; however, most of this was
accomplished by an additional drawdown on its line of credit, which
increased by approximately $700,000 to $2,600,000. In addition, Premio
has outstanding a standby letter of credit in the amount of $1,000,000.
This appears to serve as collateral for purchases made on credit from
one of its major equipment suppliers, Intel of America. Premio has total
borrowing capacity of $8.0 million, all under a line of credit with
Cathay Bank. However, the amount available is based on a formula tied
to the level of accounts receivable. Key covenants in the lending arrangement
include a minimum tangible net worth requirement of $7.5 million, current
ratio (current assets/current liabilities) of 1.2 and maximum debt to
tangible net worth ratio of 3/1. During our review in 2005, we found
that Premio was close to violating some of these debt covenants.
Premio's three shareholders (who are also part of the company's senior
management) were paid a total salary of $420,462 in 2004, or an average
of $140,154 per individual. Senior management as a whole, comprising
6 individuals, was paid a total of $786,733. Our review determined that
these amounts do not appear excessive and amounted to less than one
half of one percent of sales.
Premio leases its headquarters and manufacturing facility in Industry,
CA from an entity that is owned by the two majority shareholders. Annual
lease payments are approximately $697,000 for the 135,100 square feet
facility. The lease was originally entered into in 1999 and was represented
to be at market rate terms. The rate does not appear excessive, given
current market conditions in the Southern California real estate market.
In 2005, Premio provided DOJ with a 3-year operating projection through
2007. The projections call for modest sales growth of about 6-8 percent.
However, this is accompanied by higher wages for employees as well as
added marketing costs. Total after-tax profit is projected to be approximately
$1.6 million for the 3-year period. Given Premio's lack of pricing power
for its products, as well as its heavy reliance upon one customer for
a bulk of its sales, achievement of these projections is uncertain.
Premio has been able to fund its business and capital needs by increasing
its borrowings rather than by profits. With borrowings of $2.6 million
versus cash of $850,000, the company is vulnerable to a liquidity crisis
if there is a slowdown in business. The increased amount of debt could
also result in higher than expected borrowing costs as interest rates
trend higher toward historical norms and violation of debt covenants
could also trigger additional financial penalties.
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