Oracle closes book on PeopleSoft overcharging

Oracle Corp. has agreed to pay the U.S. government $98.5 million to settle allegations that PeopleSoft Inc., which it acquired last year, overcharged federal buyers under the General Services Administration's multiple-award schedule program.

When Oracle acquired PeopleSoft Inc. of Pleasanton, Calif., for $10.3 billion in January 2005, it inherited its liability under the GSA contract. Former PeopleSoft employee James Hicks told government officials that PeopleSoft did not give federal buyers discounts for purchases of multiple goods and services that commercial customers received. The false pricing is alleged to have taken place over a period of eight and one-half years.

The settlement is the largest payment ever obtained by the United States in a civil settlement under the False Claims Act involving the GSA's multiple-award schedule program, the Justice Department said Tuesday in a printed statement.

The False Claims Act is a federal law that imposes liabilities for damages and fines for knowingly submitting to the federal government a false or fraudulent claim for payment.

Those with insider knowledge of false claims in government spending programs can receive a percentage of the settlement. Hicks will receive $17.7 million, the Justice Department said.

The U.S. Attorney's Office for the District of Maryland and GSA's Inspector General Office investigated the allegations along with the Justice Department. The lawsuit alleged that PeopleSoft gave GSA inaccurate pricing disclosures and incomplete information about the sales of software licenses and related maintenance services.

As a result, the federal agencies that made purchases under the contract overpaid PeopleSoft for software and related maintenance services between March 17, 1997, and Sept. 30, 2005, the Justice Department said.

"Because PeopleSoft did not give GSA accurate pricing information, it negotiated higher prices for its products and services than it would have obtained if GSA had known the truth," said Rod Rosenstein, U.S. attorney for the District of Maryland. "The substantial recovery in this case will help to ensure that vendors provide truthful information and the government pays a fair price for products and services."

Bob Wynne, an Oracle spokesman, wrote in a statement that the company distributed to the media that PeopleSoft was the exclusive focus of the False Claims Act's whistleblower provision. He added that Oracle cooperated fully with the government's investigation of PeopleSoft's GSA contract and conduct.

Oracle was not aware of the suit when it acquired PeopleSoft, Wynne said. "Oracle is pleased to have fully resolved this legacy PeopleSoft suit and all claims under the PeopleSoft contract," he said.

The Redwood City, Calif., company did not provide any comment on whether it has put in place new policies or procedures to ensure that similar problems do not occur in the future.

More than 100 U.S. government organizations use Oracle applications along with 33 of the country's 50 states, according to the company. Oracle ranks No. 32 on Washington Technology's 2006 Top 100 list of the largest federal IT contractors.

Deputy Attorney General Paul McNulty relayed details of the settlement during a press conference yesterday at which Justice Department officials announced the formation of a national procurement fraud task force to combat similar investigations of government fraud.