CA Technologies Settles for $10 Million

The Department of Justice announced a settlement in unique case advancing a uncommon theory of recovery for False Claims Act (“FCA”) lawsuits. CA Inc., (“CA”), agreed to padollar-billy $45 million to resolve allegations brought by a whistleblower under the FCA.

CA’s settlement further cements the government’s commitment to routing out fraud with the help of “whistleblowing” employees. People with information about frauds against the government stand to benefit significantly financially, and may disrupt immoral and dishonest practices. Dani Shemesh, the former employee of CA Software LTD that filed the suit in 2014, will receive $10,195,000 for the information she provided.

Shemesh alleged that CA Software made false representations and claims in the negotiation and performance of a General Services Administration (“GSA”) software and licensing contract.

The GSA is responsible for the management of all U.S. federal government property and frequently negotiates contracts for procuring goods, management services, and IT products. The settlement resolves allegations that the company did not disclose its “commercial discounting” practices to the government, as was required by CA’s contract with the federal agency, and that the company made false statements to the government in its 2007 contract renewal. FCA plaintiffs, in legalese called “relators,” infrequently rely on theories of recovery that rely upon “discounts” owed to the government.

The False Claims Act is a law that provides protections for “whistleblowers,” who come forward with information not previously known to the government about waste or financial fraud on taxpayers. Though the FCA has been law since the late 1800s, passed after rampant frauds on the government enraged citizens, its use as changed throughout its existence.

The law originally provided the post-American Civil War administration, a government in peril, reeling financially and physically from the war, with a vehicle to recoup stolen funds. “War barons” contracting with the government to supply goods and services to the army during the war hastily bilked money from taxpayer coffers, while providing subpar or, oftentimes nonexistent, goods and services.

In announcing the settlement, Acting Assistant Attorney General Chad. A. Readler remarked, “We will take action against contractors who withhold information and cause the government to pay more than it should for commercially available items.”

In September 2002, CA entered into a GSA contract to provide software licenses, software maintenance, training and consulting services to various government agencies. The government’s complaint alleges that, since at least 2006, CA “knowingly overcharged the government for software licenses and maintenance in various ways.”

For example, Shemesh gave information to the government that suggested CA provided incomplete and inaccurate information to GSA contracting officers during negotiation of contract extensions.  At the time CA negotiated these extensions, applicable regulations and contract provisions required CA to fully and accurately disclose how it conducted business in the commercial market, so GSA could use that information to negotiate a fair price for government customers.  The government also alleges that CA failed to truthfully update its discounting practices during the life of the GSA contract. In 2007, many of CA’s contracts were “up” for renewal with the government, and the company allegedly should have updated its pricing to reflect cost decreases, lowering the cost of the contracts to the GSA.

CA Technologies repeatedly certified to GSA that its discounting policies and practices had not changed, when in fact its discounts to commercial customers had increased. For instance, in CA’s 2009 submissions to GSA, CA defined a segment of customers to include “[s]ome Enterprise License Agreements.” By excluding customers CA actually services in the marketplace from the discount calculation, CA allegedly “knowingly withheld price reductions owed to the United States.”

This FCA case is unique, as most allegations of fraud include outright charges for government services not rendered, or charges for goods or services that are grossly exaggerated. CA’s scheme involved making omissions in mandatory cost-reduction calculations that increased monies owed to the company, thereby effectuating a revenue regime for the accumulation of ill-gotten funds.

The myriad intricate considerations in bringing a whistleblower suit can be facilitated and eased with the help and advice of an experienced False Claims Act attorney

Contact Information