Government Joins Case Against Oracle Alleging Overpayment for Software

The Department of Justice (DOJ) has decided to intervene in a False Claims Act case against Oracle Corporation, a software manufacturer that had a contract with the General Service Administration (GSA).  The federal government alleges Oracle defrauded the government into overpaying it hundreds of millions of dollars over the course of an eight year contract, from 1998 to 2006.

Contracts with the GSA require the company to disclose its best commercial price and discounts, allowing the government to make an informed decision about prices it then negotiates. The contracts also require companies to update the government on any new prices or discounts offered to commercial customers which could reduce the price it offers to the government.  Allegedly, Oracle failed to update the government on significant price discounts offered to commercial customers, leading the U.S. to overpay for Oracle’s software.

The case was initially filed by whistleblower Paul Frascella, the former Senior Director of Contract Services at Oracle.  Now that the government has intervened, Frascella is entitled to 15%-25% of any eventual recovery from Oracle.  Considering the size of the contract and the number of years it was in existence, the potential settlement could be in the hundreds of millions of dollars, meaning a possible large payday for Frascella for his efforts and information.

UPDATE – August 9, 2010
Legal experts predict that the case against Oracle could reach a settlement upwards of $1 billion.  Based on the size and length of the contract, the size of the alleged fraud, and the treble damages provision in the FCA, this settlement could prove to be one of the largest concerning a GSA contract.

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