AT&T Missouri, which used to do business as Southwestern Bell Telephone L.P., has agreed to pay the U.S. Government $1.4 million as part of a settlement of a civil lawsuit alleging that the company violated the False Claims Act in connection with the Federal Communications Commission's E-Rate program.

The U.S. Department of Justice, which brought the action, announced the settlement.

The E-Rate program, which Congress created in the Telecommunications Act of 1996, provides funding for needy schools and libraries to connect to and utilize the Internet. Under the program, which is supported by fees collected from telephone users, schools apply for funds to pay for hardware and monthly connectivity service fees.

The government contended that AT&T Missouri provided false information to the E-Rate program and otherwise violated the program's requirements by engaging in non-competitive bidding practices for E-Rate contracts. The Justice Department further alleged that AT&T Missouri employees colluded with officials in the Kansas City, Mo., School District to award contracts to the company, extended contracts in violation of E-Rate rules and provided meals and other inducements to school district employees.

The government previously filed suit against and settled with the Kansas City, Mo., School District.

These allegations arose from a False Claims Act lawsuit filed in Missouri federal court by American Fiber Systems Inc., which submitted an unsuccessful bid to the Kansas City, Mo., School District for the E-Rate contracts that were awarded to AT&T Missouri.

The False Claims Act allows private parties to bring fraud claims on behalf of the United States and to share in the proceeds of any recovery. American Fiber Systems Inc.'s share of the settlement will amount to $195,000.

"The E-Rate program provides critical support for Internet access to the most under-served schools in the nation," said Tony West, Assistant Attorney General for the Department of Justice's Civil Division. "Working with our partners at the FCC's Office of the Inspector General, the Department of Justice is committed to ensuring that this important program, which benefits our neediest children, not be misused by those seeking to defraud the public."