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Oracle Pays $98.5 Mil For Pricing Fraud

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When Oracle acquired PeopleSoft, it also acquired what would be one of the largest civil settlement payouts to the US government in history, and perhaps until recently, one of history’s best-compensated whistleblowers on the payroll, who got nearly 20 percent of the government’s take.

The Department of Justice is collecting a $98.5 million settlement from Oracle, after PeopleSoft was found guilty of hiking up its prices for government contracts from 1997 until 2005. James A. Hicks, a former PeopleSoft employee, will get $17.73 million for his role in outing his company.

PeopleSoft negotiated the government contract under the General Services Administration (GSA) Multiple Award Schedule (MAS) program, which allows for blanket purchasing for myriad government institutions. Later, the Department of Justice accused PeopleSoft of “defective pricing disclosures” after it learned that at least one customer in the Nineties was given discounts of up to 74 percent.

“GSA’s Multiple Award Schedule program serves vendors and government purchasers by eliminating red tape while insuring that government agencies get a fair deal for the American taxpayer’s procurement dollars,” said Deputy Attorney General General Paul J. McNulty.

“The program works well when vendors follow the disclosure rules and provide GSA with the information it needs to negotiate good prices for government purchasers. This agreement demonstrates the Department’s determination to hold vendors accountable for abusing GSA’s trust and damaging its programs.”

The payment is the largest ever obtained by the United States in a civil settlement under the False Claims Act involving the GSA’s MAS program. Under the program, vendors agree to disclose their commercial pricing policies in exchange for access to hundreds of government purchasers. GSA regulations require vendors to disclose “current, accurate and complete” commercial pricing policies during negotiations.

“All companies that want to avoid their disclosure obligations while selling products to the United States government are on notice today that we will use the False Claims Act and all other civil legal tools at our disposal to fight fraud and abuse,” said Assistant Attorney General Peter D. Keisler.

The lawsuit alleged that PeopleSoft failed to disclose the true nature of its multiple product discounting practice, a program that afforded buyers incrementally steeper discounts off list prices or software products based on the number of products purchased at one time. As a result, says the DOJ, the government overpaid for software and related maintenance.

“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,” said U.S. Attorney Rod J. Rosenstein.

GSA Inspector General Brian D. Miller joined the government dog pile. “GSA’s MAS contracting program – with sales of well over $30 billion in the last fiscal year – depends on vendors’ honesty in negotiations.

“PeopleSoft misled and overcharged the government for years. Without the auditors’ specialized training and years of experience examining federal contracting arrangements, the wool would have remained over everyone’s eyes and the taxpayers might have again taken a fleecing.”

The case was filed under the whistleblower provisions of the False Claims Act by Hicks in the US District Court for the District of Maryland. Under the whistleblowers provisions, private citizens known as “relators” can sue on behalf of the government to recover federal funds that were obtained by false or fraudulent claims, and receive a portion of the proceeds.

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Oracle Pays $98.5 Mil For Pricing Fraud
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