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Qui Tam Whistleblower Settlement Update: Beware with Government Contracts – False Claims Act Violations Can Cost You

above-the-bar-logo-no12.jpgAlthough doing business with the U.S. government can be quite lucrative, any unlawful or fraudulent practices by your company can cost you heavily. The Justice Department just entered into a settlement with Oracle Corp. and Oracle America Inc. (“Oracle”), who have agreed to pay $199.5 million plus interest for violating the False Claims Act. This is the largest settlement ever obtained by the General Services Administration under this Act.

The lawsuit alleges that Oracle committed fraud in its dealings with the General Services Administrations (“GSA”) regarding the sale of its software licenses and technical support. Oracle had entered into a contract with GSA through its Multiple Award Schedule (MAS) program which gave Oracle the benefit of selling its products to multiple government agencies. According to the MAS, Oracle had to agree to disclose its commercial pricing practices. PaulFrascella, a contract specialist working at Oracle at the time, discovered that Oracle was not disclosing its current and accurate information about its commercial sales practices and discounts it was offering to other clients.

The government also alleged because Oracle did not disclose higher discounts it offered to its commercial clients, the government was paying more than it should have. The lawsuit alleges that GSA purchased $1.08 billion in software from Oracle between 1998 and 2006. GSA received discounts ranging from 25 to 40 percent while Oracle gave other companies discounts ranging up to 92 percent.

In May 2007, Frascella filed the lawsuit on behalf of the government who joined the lawsuit last year. Pursuant to the False Claims Act, Frascella will get $40 million as his share of the recovery.

Tony West, Assistant Attorney General for the DOJ’s Civil Division, stated that “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.” He also stated that the government is committed to “ensure taxpayers are not overpaying for the products and services they receive.”

Oracle has denied any wrongdoing and claims that it “had strong controls in place to insure that the government agencies who purchased from the GSA schedule received fair pricing.” Oracle has claimed that it decided to settle because the events took place a long time ago and many witnesses are either unavailable or do not remember what happened.

This lawsuit sends a clear message to all businesses that if you do business with the government, make sure you comply with all contractual obligations and regulations. It is difficult to believe that a company as big as Oracle does not have records of its business transactions. With the help of whistleblowers, the government has been cracking down on violations of the False Claims Act. In fact, the Department of Justice has recovered over $7.8 billion since January 2009 for such violations. If you are doing business with the government, call our False Claims Act Attorneys at Villanueva & Sanchala at (800) 893-9645 to ensure that your company is in compliance with its government contracts.

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