Oracle has agreed to pay US$199.5 million plus interest for failing to meet its contractual obligations in a 1998 contract with the U.S. General Services Administration, the U.S. Department of Justice announced.
The settlement is the largest the GSA has ever obtained through the False Claims Act, which allows the DOJ and whistleblowers to file lawsuits targeting government contractors for alleged fraud. Former Oracle employee Paul Frascella will receive $40 million as his share of the recovery in the case, the DOJ said.
Oracle denied the allegations in a statement. "Oracle vigorously denies that it did not scrupulously adhere to the pricing requirements of that contract," it said. "The company has always had strong controls in place to insure that the government agencies who purchased from the GSA schedule received fair pricing. Oracle never committed any fraud whatsoever."
Many witnesses are no longer available after 13 years and some "do not clearly recall these events," Oracle said. "Oracle has therefore decided to avoid the distraction and high cost of litigating this case by settling."
The case involves a GSA contract for Oracle to sell software licenses and technical support to government agencies. The contract was through the GSA's Multiple Award Schedule (MSA) program, which allows multiple government agencies to purchase products through a streamlined procurement process. MSA vendors agree to disclose commercial pricing practices, the DOJ said in a statement.
Frascella, a former Oracle contract specialist, alleged that Oracle failed to provide the GSA with current and accurate information about its commercial sales practices, including discounts offered to other customers. The lawsuit, filed in May 2007, also alleged that Oracle knowingly made false statements to the GSA about its discounts, and that Oracle failed to pass higher commercial discounts on to government agencies.
The DOJ joined the lawsuit in 2010 and alleged that U.S. agencies paid "far more" than they should have for Oracle products, the DOJ said in a press release.
"Companies that engage in unlawful or fraudulent practices to secure government business undermine the integrity of the procurement process and create an unfair advantage against the majority of companies that are playing by the rules," Tony West, assistant attorney general for the DOJ's Civil Division, said in a statement. "Resolutions like this one ... demonstrate our commitment to ensure taxpayers are not overpaying for the products and services they receive."
The DOJ's recoveries in False Claims Act cases since January 2009 exceed $7.8 billion.
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is firstname.lastname@example.org.