Oracle to pay $46 million to settle kickbacks complaint

The settlement stems from a lawsuit filed against Sun Microsystems, which merged with Oracle last year

Oracle has agreed to pay the U.S. government US$46 million to settle complaints that Sun Microsystems, which merged with Oracle in 2010, engaged with other technology vendors in a kickbacks scheme affecting government contracts, the U.S. Department of Justice announced.

The settlement involves allegations dating back to 2004 that Sun paid kickbacks to systems integrators in return for their recommendations of Sun products to federal agencies. Consulting companies received payments from Sun each time they influenced a government agency to purchase Sun products, the DOJ said in a press release.

The complaints stem from a whistleblower lawsuit filed in U.S. District Court for the Eastern District of Arkansas by Norman Rille, a former manager at Accenture, and Neal Roberts, a former partner at PricewaterhouseCoopers. They alleged a widespread kickbacks scheme among dozens of IT vendors and systems integrators vying for U.S. government contracts.

Six other companies, including IBM, PricewaterhouseCoopers and Computer Sciences, have reached settlements with the DOJ over similar charges. IBM agreed to pay $3 million, PwC agreed to pay $2.3 million and Computer Sciences agreed to pay $1.4 million in their settlements.

Monday's settlement with Oracle also resolves claims under the False Claims Act that Sun's 1997 and 1999 U.S. General Services Administration Schedule contracts were defectively priced because Sun provided incomplete and inaccurate information to GSA contracting officers during negotiations, the DOJ said. The settlement also resolves complaints that the inaccurate information led to defective pricing in Sun reseller contracts with the GSA and U.S. Postal Service.

U.S. regulations required Sun to disclose how it priced products in the commercial marketplace so that GSA could negotiate a fair price, the DOJ said.

"Kickbacks, illegal inducements, misrepresentations during contract negotiations -- these undermine the integrity of the government procurement process and unnecessarily cost taxpayers money," Tony West, assistant attorney general for the DOJ's Civil Division, said in a statement. "As this case demonstrates, we will take action against those who abuse the public contracting process."

Oracle representatives did not immediately return a phone message and an e-mail seeking comment on the settlement.

Under the False Claims Act, private citizens may file complaints on behalf of the U.S. government and share in the recovery of funds. The DOJ joined the lawsuit by Rille and Roberts in 2007.

The government's defective pricing allegations against Sun were based on an audit conducted by the GSA Office of Inspector General, which concluded that Sun provided inaccurate information during contract negotiations.

"Our auditors did not waver," GSA Inspector General Brian Miller said in a statement. "They pursued the facts until they got to the truth. This case shows that with a lot of hard work and tenacity, justice will prevail."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Tags governmentOracleIBMaccentureSun MicrosystemsCivil lawsuitsGovernment use of ITBrian MillerComputer SciencesPricewaterhouseCoopers International

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Grant Gross

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