Oracle pays $46 million to settle Sun Microsystems' False Claims Act liability

by Ben Vernia | January 31st, 2011

On January 31, the Department of Justice announced that Oracle America, Inc. – into which Sun Microsystems merged in 2010 – has agreed to pay $46 million to settle kickback allegations brought in a whistleblower lawsuit. According to DOJ’s press release:

Oracle America Inc. has agreed to pay the United States $46 million to settle claims that Sun Microsystems Inc., a corporation that merged with Oracle in 2010, submitted false claims and caused others to submit false claims to the General Services Administration (GSA) and other federal agencies, the Justice Department announced today.

This settlement resolves allegations under the False Claims Act (FCA) and Anti-Kickback Act that Sun knowingly paid kickbacks to systems integrator companies in return for recommendations that federal agencies purchase Sun’s products. Sun executed agreements with consulting companies that provided for the payment of fees each time the companies influenced a government agency to purchase a Sun product. These kickback allegations are part of a larger, ongoing investigation of government technology vendors that has resulted in settlements to date with six other companies.

The settlement also resolves claims under the FCA that Sun’s 1997 and 1999 GSA Schedule contracts were defectively priced because Sun provided incomplete and inaccurate information to GSA contracting officers during contract negotiations, as well as claims that the incomplete and inaccurate information resulted in defective pricing of Sun’s contract with the U.S. Postal Service and GSA Schedule contracts held by two resellers of Sun products. At the time Sun entered into its contracts with GSA to sell information technology products and services to federal agencies, applicable regulations and contract provisions required Sun to fully and accurately disclose to GSA how it conducted business in the commercial marketplace so that GSA could use that information to negotiate a fair price for government customers using the GSA contracts to purchase Sun products and services. The defective pricing information that Sun disclosed to GSA was subsequently relied on by the Postal Service in negotiating a contract with Sun, as well as by GSA in negotiating contracts with two resellers of Sun products.

The government announced that two relators brought the case in a qui tam lawsuit, but it did not announce the amount of their share in the recovery. In addition to the relators’ kickback allegations, GSA investigated, and the government alleged in its complaint, that Sun engaged in defective pricing, i.e., providing false or fraudulent pricing data when bidding on a GSA contract.

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