CA Accused of $100 Million U.S. Software Contract Fraud

CA Technologies Inc., a maker of software for managing information technology, was accused of overcharging the U.S. on contracts, allegedly costing the government more than $100 million.

CA failed to accurately disclose its pricing for private-sector customers as required by law, according to a lawsuit unsealed today in federal court in Washington. As a result, the General Services Administration didn’t get the price it should have for government customers including the Defense, Labor, Energy and Health and Human Services departments, according to the complaint.

“CA repeatedly certified to GSA that its discounting policies and practices had not changed, when in fact its discounts to commercial customers had increased,” the Justice Department said in a statement announcing the suit.

Under the law, the government is entitled to negotiate for the best price a contractor offers other large customers and the vendor must explain any difference for what it wants to charge the U.S.

CA gave discounts of 90 percent or more to commercial buyers and much smaller reductions to GSA, according to the suit. The government was charged $34,487 for a software license, a discount of 50 percent from the list price, while a private sector customer, Bank Leumi Le-Israel Ltd. was charged $3,400, according to an example cited in the complaint. The faulty pricing allegedly began in 2006.

Israeli Unit

Some of the accusations against the Islandia, New York-based company were filed under seal in 2009 by Dani Shemesh, a former employee of its Israeli unit, alleging violations of the False Claims Act. That law allows private parties to sue on behalf of the government and share in any recovery. The Justice Department joined Shemesh’s complaint in 2012.

“Material aspects of the government’s liability theories are unfounded,” Jennifer Hallahan, a spokeswoman for CA, said in an e-mailed statement. “We’ve had numerous discussions with the government and continue to believe that dialogue in good faith will lead to a satisfactory outcome.”

CA rose 5 cents today to $28.95 in Nasdaq Stock Market trading.

The case is U.S. ex rel Shemesh, 09-cv-01600, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Fred Strasser, Andrew Dunn

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