Oracle Seeks to Bar U.S. From Giving States Whistleblower Data

Oracle Corp., the world’s second- biggest software maker, will ask a federal magistrate judge in Virginia today to keep company data in a whistleblower case out of the hands of state prosecutors.

Oracle, accused in a U.S. lawsuit of overcharging the government on software contracts worth $1 billion, will argue in a hearing in Alexandria that U.S. Magistrate Judge Thomas Jones should block the Justice Department from sharing confidential company information with state attorneys general.

Lawyers specializing in whistleblower cases said Oracle’s request to shield documents from state governments may be an attempt to limit the company’s liability, which some attorneys not involved in the case said could be as much as $1 billion in the U.S. lawsuit alone.

“Whenever there is federal money involved, often there is state money involved,” Jeb White, a Philadelphia lawyer who represents whistleblowers, said in an interview. “Oracle wants to keep that information from spreading out to other potential plaintiffs.”

The lawsuit was filed under the False Claims Act in 2007 by Paul Frascella, a former Oracle employee, and joined by the Justice Department on July 29. The act lets citizens sue on behalf of the government and share in any recovery, while the government has the option of intervening in a case. The U.S. is seeking triple damages and can collect as much as $11,000 for each false billing.

Discount Rates

Oracle is accused of inducing the General Services Administration, or GSA, to buy $1.08 billion in software from 1998 to 2006 by falsely representing that the government was receiving the same discounts as most-favored commercial customers. Oracle instead gave companies discounts of as much as 92 percent, while the government’s reductions ranged from 25 percent to 40 percent, the U.S. claims.

Under the contract, Oracle promised discounts to the government at scheduled rates. In return, it didn’t have to bid each time it sold software to 21 agencies, including the State, Defense and Treasury departments. The GSA helps manage federal properties and assists other agencies in buying goods and services.

Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, didn’t return a phone call and e-mail seeking comment. Oracle reported net income of $6.14 billion on sales of $26.8 billion for the year ended in May.

Protective Order

The U.S. requested a protective order, agreeing that some information it received from Oracle during the case should be kept from the public such as financial and trade secret data, according to court papers.

The U.S. said it would only share information deemed confidential with Congress and federal and state agencies.

Oracle objected to the sharing proposal, alleging in court papers that it would “permit any employee of the government who views Oracle’s confidential materials to then contact any state government, unsolicited, and share copies of that material.”

“To the extent any state feels it has an interest in this litigation, the proper course is for such a state to seek to intervene, rather than simply review Oracle’s confidential materials from the sidelines,” Oracle said in court papers.

Frascella, the whistleblower, filed his own objection to Oracle’s proposed protective order, noting that many states have procurement programs similar to the GSA’s.

‘Ripping Off States’

“Oracle apparently is afraid that GSA or the Department of Justice may share information demonstrating that Oracle has been ripping off states too,” Frascella said in court documents.

John T. Boese, a lawyer who defends companies in false claims cases, said the Justice Department may be using the threat of state action to force a settlement.

“One way to put pressure on a defendant is to get more states involved,” said Boese of Fried, Frank, Harris, Shriver & Jacobson LLP in Washington.

Marc Raspanti, a Philadelphia lawyer who represents whistleblowers, said 28 states have false claims laws similar to the federal government’s.

“There’s no faster way to galvanize a state against a defendant than to tell them they can’t see the materials provided to the federal government,” Raspanti said.

On Jan. 31, Oracle America Inc. agreed to pay $46 million to resolve claims that Sun Microsystems Inc., which merged with Oracle last year, paid kickbacks in an attempt to get government contracts and submitted false information to U.S. contracting officers.

The case is United States of America v. Oracle Corp., 07- cv-00529, U.S. District Court, Eastern District of Virginia (Alexandria).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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