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 GSA's 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 Department's determination to hold vendors accountable for abusing GSA's trust and damaging its programs," said Deputy Attorney General Paul J. McNulty, who handled the case, in a statement.
Oracle could not be immediately reached for comment about the settlement.
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 lawsuit's 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.
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