The contract with the General Services Administration, in effect from 1998 to 2006, required the Redwood City software giant to disclose and extend any commercial discounts to government customers, the government said Thursday. The suit claims that Oracle misrepresented its sales practices in several ways, forcing the government - and by extension taxpayers - to overpay.
"We take seriously allegations that a government contractor has dealt dishonestly with the United States," Tony West, assistant attorney general for the department's civil division, said in a statement. "When contractors misrepresent their business practices to the government, taxpayers suffer."
The lawsuit against Oracle was originally brought in 2007 by whistle-blower Paul Frascella, a former senior director of contract services at Oracle, under the False Claims Act. The law provides financial incentives for private citizens with knowledge of fraud to file suits on behalf of the government. The Justice Department joined the suit Thursday.
Under the act, Frascella can seek between 15 and 25 percent of any damages awarded in the case. The government, which filed the suit in U.S. District Court for the Eastern District of Virginia, didn't specify the amount it was seeking.
Big award possible
The fact that the contract was worth hundreds of millions of dollars could propel potential damages toward the upper range seen in these cases, said Eric Talley, professor at UC Berkeley's School of Law. Similar False Claims Act suits, under which damages can be tripled from the amount of the fraud, have recently been settled for about $100 million.
The General Services Agency sealed an agreement with Oracle that allowed it to buy products and services at the same discounted prices granted to a vendor's most favored customers around the time of the purchase. The department often strikes such deals to avoid the considerable cost of continually negotiating numerous contracts for multiple agencies.
Winning record
David Kwok, a doctoral student at UC Berkeley, is writing his dissertation on whistle-blower cases under the False Claims Act. When the Justice Department participates in the lawsuit, which happens in about one fourth of the cases, companies end up paying the government in 96 percent of those cases, he said.
The Justice Department said it collected $2.4 billion from False Claims Act suits during the fiscal year that ended Sept. 30. Settlements total more than $24 billion since 1986, when Congress strengthened the law.
The vast majority of cases involve health care companies accused of Medicare fraud, followed by defense contractors charged with bilking the military, Kwok said.
Oracle isn't alone among accused technology companies, however. In May, EMC Corp. of Hopkinton, Mass., handed the government $87.5 million to settle a lawsuit alleging that it overcharged the General Services Agency. NetApp Inc., the Sunnyvale storage company, paid a record $128.7 million to settle a similar case last year.
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