U.S. joins whistleblower suit against Oracle

August 31, 2010  |  Class Actions, Whistleblower/Qui Tam

The United States has intervened in a False Claims Act suit filed against software manufacturer Oracle.  The government charges that the company bamboozled the government by charging it higher prices than the deeply discounted prices offered to Oracle’s commercial customers.  According to the Justice Department, the scheme violated federal regulations governing General Services Administration contractors hired under Multiple Award Schedule contracts, which cut through some of the usual red tape for federal agencies looking to purchase products from the GSA schedule.  To ensure that the government receives as good a deal as contractors’ commercial customers, contractors must provide the government with “the best price given to the most favored customer.”

The lawsuit against Oracle was first filed in May 2007 by one of the company’s contract specialists, Paul Frascella.  Oracle intentionally violated the GSA contract provisions, Frascella alleged, so the company could give larger discounts to its commercial customers.  The complaint alleges that Oracle instructed its employees that the government discount provision applied only to computer and database products, not to enterprise software, and that the contractual provisions did not cover sales where the net licensing fees were less than $200,000.  When employees questioned the practice, the complaint alleged, Oracle’s VP of global practices instructed workers to quit asking about it and refused to communicate in writing for fear that written correspondence could be used against the company.

Oracle is also accused of several other schemes for awarding favored pricing to its commercial clients:  selling to the retailer-customer at a deeply discounted rate and permitting the retailer to sell to end users at prices below the maximum allowable discount; simply leaving prices off commercial contracts with only the net fee visible; and making “price hold” contracts with commercial customers.

Frascella filed his lawsuit under the Qui Tam provisions of the federal False Claims Act, which enables private individuals to sue for fraud against the government and to collect a percentage of any damages or settlement received.

For the complete story, go to http://www.informationweek.com/news/government/enterprise-apps/showArticle.jhtml?articleID=225700517.

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