Cisco and Westcon pay $48M to settle GSA pricing dispute

Cisco Systems and Westcon Group North America will pay the United States $48 million to settle claims they made misrepresentations to the General Services Administration and other federal agencies in violation of the False Claims Act, the Justice Department announced.

The civil settlement resolves the government’s assertions that Cisco and Westcon, formerly known as Comstor, “knowingly provided incomplete information to GSA contracting officers during negotiations in regard to Westcon’s contract with the GSA, which resulted in defective pricing of Cisco products and submission of false claims to the United States,” the statement said.

GSA schedule holders are required to give the government their best prices.

Contractors must deal fairly with federal agencies, said Tony West, assistant attorney general for the Civil Division of the Justice Department, in the announcement.

“When contractors provide incomplete and untruthful information to the government, we will take action to restore the integrity of the procurement process and protect taxpayer dollars,” he said.

“The prices paid by government agencies for commercial products are ultimately borne by the taxpayers, and the producers and sellers of those products must be held accountable for any questionable practices.” added Jane Duke, U.S. attorney for the Eastern District of Arkansas.

“Overcharging the government results in waste of taxpayer dollars,” said GSA Inspector General Brian Miller. “Our auditors and special agents keep vigilant watch to ensure contractors stay honest.”

As a part of this settlement, the government is dismissing the whistle-blower lawsuit filed in 2004 in the case of United States District Court for the Eastern District of Arkansas, United States ex rel. Rille. v. Cisco Systems Inc.

The case was handled by the Justice Department’s Civil Division and the Office of the U.S. Attorney for the Eastern District of Arkansas, with assistance from GSA’s Office of Inspector General, the Energy Department’s Office of Inspector General, the Defense Criminal Investigative Service and the Defense Contract Audit Agency.

Such false claims investigations have become increasingly common in recent years, especially as whistle-blowers are entitled to between 15 and 25 percent of the government’s recovery under the False Claims Act.

In June the Justice Department announced it was investigating claims by a whistle-blower that Oracle Corp. had failed to disclose discounts it gave its favored commercial customers.

The Oracle case was preceded by a settlement reached in May with EMC Corp., which agreed to pay $87.5 million to settle similar charges involving its pricing on the GSA Schedule.

In April 2009, NetApp Inc. paid $128 million to settle its dispute with the Justice Department and GSA.

The EMC and NetApp cases also were instigated by whistle-blowers.

Other companies that have come under scrutiny from Justice and GSA include Sun Microsystems and Panasonic Corp.

Often the pricing issue comes up when companies attempt to renew their positions on the GSA Schedule.

The result has been that several companies, including Sun and Cisco, no longer hold their GSA schedules directly and instead use third parties to sell through GSA.