In a Wednesday statement, the Federal Communications Commission (FTC) said that the agency, along with the Justice Department, was worked out a $16.25 million fraud-case agreement with Hewlett-Packard (HP), to settle a government probe into HP having sought high-dollar contract bids by lavishing gifts on two school district customers.

The FCC and the Justice Department initiated the extensive fraud-case probe against HP after whistle blowers tipped off officials.

According to reports, HP's involvement was being investigated in a fraud in the FCC's E-Rate program that funds Internet connections in schools and libraries. According to an e-mailed statement by the Justice Department, companies working with HP and some other firms gave gifts to school districts in Dallas and Houston to win contracts.

It was reported that part of the payola for winning the contracts - which included nearly $17 million in HP equipment for the E- rate program - included yacht trips as well as 2004 Super Bowl tickets. In addition, HP contractors also gifted meals and entertainment, in lieu of accessing inside information and winning bids that supposedly were to be achieved after an aggressive bidding process.

Noting that the settlement deal with HP marks the extensive efforts of the FCC and the Justice Department "to protect the E-rate program from waste, fraud and abuse, and to deter misconduct in the future," the FCC added that it will monitor HP's future performance with a compliance agreement, so as to make sure that company abides by established bidding regulations.