Oracle Settles Price-Gouging Claim
New Federal Task Force to Target Procurement Fraud
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Wednesday, October 11, 2006
Database giant Oracle Corp. has agreed to pay $98.5 million to settle claims that PeopleSoft Inc., a software maker it acquired last year, had overcharged the government by providing false pricing information to the General Services Administration, the Justice Department said yesterday.
The civil settlement, reached at U.S. District Court in Maryland, was disclosed at a news conference in Washington as officials announced a new task force targeting procurement fraud. Deputy Attorney General Paul J. McNulty said the task force, established by the department's criminal division, would detect and prosecute fraud associated with increased contracting activity for national security and other government programs.
McNulty said the task force is modeled on efforts to combat fraud after Hurricane Katrina and a similar program he initiated last year when he was U.S. attorney in the Eastern District of Virginia.
The settlement with Oracle resolved allegations that PeopleSoft understated to the GSA the discounts it provided to commercial customers. GSA regulations require that a vendor disclose its commercial pricing policies during negotiations for a single contract that can give a vendor access to hundreds of government purchasers.
As a result of the defective disclosures, the government alleged, federal purchasers buying through the GSA program paid inflated prices for software and maintenance services for many years. Oracle inherited the liability when it acquired PeopleSoft, which was based in Pleasanton, Calif.
Maryland U.S. Attorney Rod J. Rosenstein said the 1997 contract resulted in about $127 million of software sales and $77 million in maintenance sales before it was cancelled by Oracle in September 2005.
A former employee of PeopleSoft's federal sales office in Bethesda filed the case in 2003 under seal in federal court in Greenbelt. James A. Hicks said in the lawsuit that he was fired in 2000 after repeatedly raising the issue with senior company officials. The government later took over the case, which had been filed under the False Claims Act.
Under the act, whistleblowers may collect a portion of any money recovered by the government that had been obtained by false or fraudulent claims. Hicks will receive $17.73 million, government officials said.
