On June 16, 2010, the media reported that a False Claims Act case had been filed by a whistleblower against Oracle Corporation alleging that the company had failed to disclose deep discounts given to the most favored commercial customers. The Department of Justice has intervened and unsealed the relator’s complaint. The Government has not yet filed its complaint but is expected to do so this summer.

GSA Schedule contractors are clearly in the hot seat for fraud allegations: Recall the NetApp settlement of $128 million reached a year ago that was based on a relator’s allegation of failure to comply with the Price Reductions Clause. Then there were the Folliard and United States ex rel. Crennen v. Dell Marketing LP (__ F. Supp. 2d. __, 2010 WL 1713633 (D. Mass. Apr. 27, 2010)) decisions issued a few months ago, both alleging that sales of products purportedly non-compliant with the Trade Agreements Act resulted in the submission of false claims by Schedule contractors. Just last month, the EMC settlement was announced, resolving allegations of false claims and improper fee payments to encourage the sale of EMC’s products off its Schedule contract. Of course, Oracle settled a prior False Claims Act case in 2006 that alleged that commercial discounts had not been properly disclosed to GSA on PeopleSoft’s (later acquired by Oracle) Schedule contract. 

This new Oracle complaint again reminds us of the risk of fraud allegations when performing a GSA Schedule contract.  Particularly because many GSA Schedule contract holders have little to no other federal government business, they apply for a Schedule contract with little consideration of the unique requirments with which they will be expected to comply — particularly the disclosure and pricing requirements.  These fraud cases underscore the importance not only of disclosing the required commerical pricing information and negotiating a workable Most Favored Customer for Schedule performance, but also of having workable internal policies and procedures that allow the contractor to comply with the Schedule contract’s requirements without compromising its commercial business pursuits.  Does your company have the policies and procedures it needs to ensure compliance with Schedule requirements?