Oracle Settles Lawsuit with Federal Government

Updated: The federal lawsuit claimed that the General Services Administration overpaid for software it had purchased from PeopleSoft during an eight-year period.

Oracle has agreed to pay $98.5 million to settle a lawsuit that claimed PeopleSoft overcharged the federal government for software it purchased during an eight-year period, the Department of Justice announced Oct. 10.

The lawsuit, which was filed in federal court in Maryland, claimed that the GSA (General Services Administration) overpaid for PeopleSoft software from March 17, 1997, to Sept. 30, 2005.

Specifically, federal prosecutors claimed that PeopleSoft understated the discounts it gave to commercial customers when the company started negotiating a contract under the GSAs MAS (Multiple Award Schedule) program.

Under the MAS program, vendors disclose their commercial pricing policies and other practices in order to gain access to the lucrative market for federal contracts.

The GSA is an independent agency that helps buy equipment and supplies for federal agencies. The GSA oversees about $66 billion worth of federal purchases each year.

In 2004, Oracle began the long and bitter process to acquire PeopleSoft. Under the terms of the original GSA contract, the Redwood Shores, Calif., software marker inherited the responsibility for the lawsuit.

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The settlement was the largest payment obtained under the federal False Claims Act involving the MAS program, according to the Justice Department.

"This agreement demonstrates the Departments determination to hold vendors accountable for abusing GSAs trust and damaging its programs," said Deputy Attorney General Paul J. McNulty, who handled the case, in a statement.

An Oracle spokesman said that PeopleSoft had been the exclusive focus of the lawsuit and that Oracle had fully cooperated with federal authorities once it became aware of the situation.

"Oracle cooperated fully with the government in its investigation of the PeopleSoft GSA contract and conduct at issue in the suit," Bob Wynne, the spokesman, wrote in a statement sent to eWEEK.

Wynne added: "Oracle was not aware of the suit at the time of the acquisition. Oracle is pleased to have fully resolved this legacy PeopleSoft suit and all claims under the PeopleSoft contract."

PeopleSoft first began negotiating with the GSA in 1997 to obtain a federal contract for its software products. During those initial negotiations, the company gave the federal government false information about its pricing.

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The Justice Department also said that PeopleSoft did not give accurate information when the contract was renegotiated.

According to the settlement: "The United States contends that PeopleSoft and PeopleSoft USA knowingly failed to provide GSA with current, accurate and complete pricing information concerning its sale of software licenses and related services (including maintenance renewals prior to September 30, 2005) during the negotiation of the Contract and extensions thereof, and failed to comply with the price reduction clauses of the Contract."

The lawsuits beginnings were in 2003, when James A. Hicks, a former PeopleSoft employee, filed a whistleblower complaint under the MAS program. The federal government became involved on April 7, 2006.

Under the MAS program, a private citizen can file a lawsuit on behalf of the federal government in order to expose false claims by a vendor. As part of the settlement, Hicks will receive $17,730, according to the Justice Department.

Editors Note: This story was updated to include additional information and comments from Oracle.

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