Oracle to Pay U.S. $199.5 Million to Settle False Claim Act Investigation

Oracle Corp. (ORCL), the world’s second- biggest software maker, agreed to pay more than $199.5 million to settle allegations it overbilled the U.S. government for nine years.

The accord resolves a lawsuit claiming Oracle induced the General Services Administration to buy $1.08 billion in software from 1998 to 2006 by falsely promising the same discounts offered to favored commercial customers. The Justice Department, which pursued the case after joining a whistleblower lawsuit, and Oracle announced the settlement yesterday.

The payout is the largest ever obtained by the GSA under the False Claims Act, which lets citizens sue on behalf of the government and share in any recovery. Former Oracle employee Paul Frascella, who filed the case in 2007, will get $40 million.

“Companies that engage in unlawful or fraudulent practices to secure government business undermine the integrity of the procurement process and create an unfair advantage,” Tony West, assistant attorney general of the Justice Department’s civil division, said in a statement.

The U.S. joined Frascella’s case in federal court in Alexandria, Virginia, and filed its own complaint last year. It claimed Oracle gave companies discounts of as much as 92 percent, while the government’s cuts ranged from 25 to 40 percent.

Oracle Corp. signage is displayed on a tent during the Oracle OpenWorld 2011 conference in San Francisco on Oct. 4, 2011. Photo: Tony Avelar/Bloomberg Close

Oracle Corp. signage is displayed on a tent during the Oracle OpenWorld 2011 conference... Read More

Close
Open

Oracle Corp. signage is displayed on a tent during the Oracle OpenWorld 2011 conference in San Francisco on Oct. 4, 2011. Photo: Tony Avelar/Bloomberg

‘Taxpayer Dollars’

“It’s more important now than ever before to make sure that taxpayer dollars are not wasted on higher prices,” GSA Inspector General Brian Miller said in the statement. “We will not let contractors victimize the taxpayers by hiding their best prices.”

Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, said in a statement that the company “denies that it did not scrupulously adhere to the pricing requirements of that contract.” Oracle has “strong controls in place to insure that the government agencies who purchased from the GSA schedule received fair pricing,” she said. “Oracle never committed any fraud whatsoever.”

Given that the events “took place so long ago, not surprisingly many of the witnesses are no longer available or do not clearly recall these events,” she said. “Oracle has therefore decided to avoid the distraction and high cost of litigating this case by settling.”

Earlier Settlement

Oracle also paid $98.5 million in 2006 to settle a case over GSA pricing at PeopleSoft Inc., a software maker Oracle bought the previous year for $10.3 billion.

In the Frascella case, Oracle was defended by the law firms of Arnold & Porter LLP and Boies, Schiller & Flexner LLP, whose founding partner David Boies entered the case in July.

“I congratulate the Department of Justice and thank them for the time and resources they spent on the case,” said Christopher Mead, an attorney for Frascella. “The DOJ had to take on two superb law firms representing Oracle and had to devote a lot of resources to the case.”

He declined further comment about his client.

Frascella started working at Oracle in 1997 as a contract specialist in the commercial sales department and was still at the company when he filed his complaint in May 2007, according to his lawsuit.

The GSA is responsible for federal facilities management, as well as design, construction, telecommunications and technology procurement.

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 reporters on this story: {Andrew Harris} in Chicago at aharris16@bloomberg.net; David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.