Oracle Corp., the world’s second- biggest software maker, faces a lawsuit brought by a whistleblower and the U.S. Justice Department claiming it overcharged the government by tens of millions of dollars.
As the Complaint summarizes,
This lawsuit is based on a scheme by Defendant Oracle Corporation ("Oracle") to defraud the United States by failing to disclose deep discounts Oracle offered to commercial customers when Oracle sold software products to federal government agencies through a General Services Administration Multiple Award Schedule. Oracle’s failure to disclose the discounts it offered to its most favored customers resulted in overcharges to the federal Government totaling tens of millions of dollars.
Failing to give the government most-favored-customer deals in a GSA contract puts you on the fast track to a qui tam suit, since the GSA damages (and the per-claim penalty) add up rapidly with each new fraudulent order placed by the government.
It seems Oracle is quite experienced in the specific fraud at issue here:
In October 2006, Oracle paid $98.5 million to settle a False Claims Act lawsuit over GSA Multiple Award Schedule pricing disclosures at PeopleSoft Inc., a software maker. Oracle bought PeopleSoft in January 2005 for $10.3 billion.
The complaint, filed in 2003 by whistleblower James Hicks, was joined in 2006 by the Justice Department.
PeopleSoft was accused of understating the discounts it provided to commercial customers, including one that got up to 74 percent off the listed price.
“Because PeopleSoft did not give GSA accurate pricing information, it negotiated higher prices for its products and services than it would have obtained if GSA had known the truth,” Rod Rosenstein, the U.S. Attorney in Maryland, said in a statement at the time.
One fact worth pointing out: the present case was originally filed more than three years ago yet only recently unsealed and served upon Oracle. Per the False Claims Act, once the Complaint was filed, it then sat silently, under seal, while the U.S. Attorney’s office for the Eastern District of Virginia investigated whether or not they would intervene in support of the case. (They did.)
That’s not to criticize the fine folks at the USAO there — these cases are massive and require an extraordinary amount of complicated work. The USAO is also quite rightly very selective in deciding whether or not to intervene in a case. Further, the most effective part of a qui tam investigation is typically the initial part done in secret prior to the unsealing of the suit.
Putting all of that together means one thing: a lot of time, money and effort spent on the investigation before the lawsuit itself really gets going. It’s hard to tell in these cases how much of the investigation was done by the USAO, and how much was done by the relator’s lawyer, but I’ll tell you this: if you dump an unprepared case on the USAO’s lap or don’t pull your weight in the initial investigation, they’ll show you the door.
Something to keep in mind next time you read another attempt to deny whistleblowers their due under the False Claims Act.