GSA has now topped the $128 million settlement it reached in 2009 with NetApp – then the largest settlement reached in an FCA action against a GSA Schedule contractor – by settling with Oracle Corporation and Oracle America Inc. this past week in the amount of $199.5 million plus interest. The settlement resolves an FCA action brought by former Oracle employee, Paul Frascella, under the qui tam provisions of the statute, in which the Department of Justice intervened.

The Government’s and relator’s complaints had alleged that Oracle provided false, incomplete, and inaccurate information to the government during its negotiation of the Schedule contract; failed to disclose deep discounts given to the most favored commercial customers; and submitted false certifications. The Government’s complaint also alleged that Oracle actively took steps to ensure that its commercial sales to its basis of award customers did not trigger the Price Reduction Clause by means such as increasing the order size to exceed the contract’s maximum order threshold, arranging for the sale through a reseller rather than directly from Oracle, or changing the terms of the software license sold to the commercial customer so that it differed from the terms of the licenses on the GSA Schedule contract.

While it would have been interesting to watch the outcome of the case had it been litigated, given the unusual allegations of fraudulent schemes to circumvent the Price Reduction Clause, the settlement amount indicates there were sufficient facts supporting at least some of the allegations, such that the company chose to settle rather than fight the case.

How to avoid being GSA’s (or a whistleblower’s) next target for a fraud action:

  • Ensure your commercial pricing disclosures are current, accurate, and complete
  • Negotiate a Basis of Award customer that your company can competently and consistently monitor with respect to discounts and changes in commercial pricing
  • Implement a rigorous tracking system to ensure that price reductions given to the Basis of Award customer(s) are also given to Government customers
  • Ensure that any certifications signed and submitted to the Government are 100% accurate
  • Implement internal controls and policies that require company personnel – from the sales force to the managers of the Schedule contract – to comply with the contractual requirements
  • Require mandatory training of company personnel to educate individuals on the contractual requirements and the importance of compliance
  • Implement a reporting system that allows employees to report concerns about the company’s compliance with the contract requirements and that ensures such concerns are properly addressed and resolved.