IBM, PriceWaterhouse pay fines for alleged kickbacks

IBM Corp. will pay $2.97 million, and PriceWaterhouseCoopers will pay $2.32 million, to settle allegations that the companies made improper payments in connection with federal IT contracts, the Justice Department announced today.

The companies will pay a total of $5.2 million to the U.S. government to resolve complaints related to payments they made to companies with whom they have global alliances, the department said in a news release.

The "alleged alliance relationships and resulting alliance benefits amount to kickbacks, as well as undisclosed conflict of interest relationships in violation of contractual provisions and the applicable provisions of the federal acquisition regulations," the release stated.

"The payment of kickbacks or illegal inducements undermines the government procurement process," Peter D. Keisler, assistant attorney general for the civil division, said in the release. "The Justice Department is acting in these cases and in the overall investigation to protect the integrity of the procurement process for technology products and services."

Although it is settling the charges with the government, IBM issued a statement strongly denying the allegations. "IBM did not engage in kickbacks, false claims, or any other illegal conduct alleged in the various complaints that have been filed in this matter. IBM's business practices and policies comply with all applicable statutes and regulations, including requirements related to government contracts," said Fred McNeese, director of IBM media relations.

The Justice Department's actions are part of a larger investigation that resulted in complaints filed in April in Arkansas against Accenture Ltd., Hewlett-Packard Co., and Sun Microsystems Inc. IBM and PWC cooperated in the investigation.

The complaints were filed in September 2004 under the whistleblower provisions of the False Claims Act. By statute, the whistleblowers in a successful U.S. government contract fraud lawsuit receive a share of the amount recovered, but the amount has not yet been determined in this case.

The agencies involved in the investigation include the Justice Department's Civil Division; the U.S. Attorney's Office in Little Rock, Ark.; the Energy Department's Office of Inspector General; the Defense Criminal Investigative Service; the General Services Administration Office of the Inspector General; NASA Office of the Inspector General; the Army Criminal Investigation Command; the Defense Contract Audit Agency; the Environmental Protection Agency Office of the Inspector General; the Postal Service Office of the Inspector General; the Navy Criminal Investigative Service; and the Air Force Office of Special Investigations.