Oracle settlement of false claim lawsuit could top $200M

Oracle failed to keep a contractual agreement with GSA in 1998.

In what will shape up to be the largest False Claims Act settlement ever collected by the General Services Administration, software maker Oracle Corp. and Oracle America will pay $199.5 million plus interest to the agency, according to a Justice Department Oct. 6 news release.

At issue is a contractual obligation that the company failed to meet relating to a 1998 agreement with GSA for Oracle to sell software licenses and technical support to government entities via GSA's Multiple Awards Schedule program.

The settlement is a result of the whistleblower provisions of the False Claims Act by which citizens can file lawsuits on behalf of the government and share in any financial gains. The Justice Department joined the lawsuit in July 2010.

As a result, whistleblower and former Oracle employee Paul Frascella will receive $40 million as his portion of the settlement.  

The settlement contends that "Oracle knowingly failed to meet its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers, and that Oracle knowingly made false statements to GSA about its sales practices and discounts," according to the DOJ statement.

In addition, the government alleges that it paid more than it should have for Oracle products because the company did not disclose discounts it passed on to commercial customers when they were higher than the discounts that Oracle had disclosed to GSA.

Tony West, assistant attorney general for the Justice Department's Civil Division, said practices like these undermine the integrity of the procurement process. It creates "an unfair advantage against the majority of companies that are playing by the rules," he said.

Oracle did not return calls to Washington Technology, but a company spokeswoman told the Federal Times in an email that "strong controls" would have insured government customers received fair prices and added that Oracle decided to settle to "avoid the distraction and high cost of litigation."