Company Accused Of Contract Fraud to Pay GSA $128 Million

By Steve Vogel
Washington Post Staff Writer
Wednesday, April 15, 2009

A data-storage company has agreed to pay the General Services Administration $128 million to settle a whistleblower complaint about its federal contracting, according to a securities filing by the company.

The Justice Department alleges that the company, NetApp Inc. of Sunnyvale, Calif., made false statements to the GSA about the discounts it was giving other customers and failed to extend proper discounts to the government.

As part of the settlement, NetApp admitted to no wrongdoing. "The Agreement reflects neither an admission nor denial by NetApp of any of the claims alleged by the DOJ, and represents a compromise to avoid continued litigation and associated risks," NetApp said in its Monday filing with the Securities and Exchange Commission.

Roger Goldman, an attorney for the company, declined to comment.

The agreement represents the largest settlement involving the GSA's federal supply procurement program, according to a news release issued on behalf of Ashcraft & Gerel, the D.C. law firm representing the whistleblower in the case.

NetApp provides hardware, software and storage management services. The investigation relates to contracts NetApp had with the GSA between August 1997 and February 2005 to sell technology products to various federal agencies.

GSA contract guidelines require companies to provide the government with accurate information about the discounts they offer to non-government commercial customers, helping the GSA to negotiate its best price.

NetApp "did not give the Government accurate and complete data about the discounts offered to commercial customers, nor did it afford the Government an opportunity to achieve its most favored customer status," the law firm's news release said.

Under the terms of the settlement, NetApp is obligated to pay the $128 million by April 27.

The settlement had not been finalized yesterday because of a clerical error, according to Vincent McKnight, a lawyer representing the whistleblower.

"There's nothing I can say at this time," Justice Department spokesman Charles Miller said.

Igor Kapuscinski, then the federal systems manager for NetApp, filed a complaint in 2006 in U.S. District Court in Washington alleging fraudulent behavior by the company, sparking the Justice Department investigation.

"Mr. Kapuscinski is an amazingly courageous man," McKnight said, according to the law firm's news release. "He saw a company program out of sync with designated federal guidelines and decided to make it right."

He is also much richer. Under the False Claims Act, a whistleblower who files a fraud complaint on behalf of the government can share in the recovery. Kapuscinski will receive a 15 percent share, or $19.2 million, according to the law firm.

Kapuscinski was not available for comment yesterday, said Deborah Schwartz, a publicist representing the law firm. "He's not to be found," she said.

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