Accenture, DOJ Case: Standard Referral Fees or Sleazy Kickbacks?

By Ericka Chickowski  |  Print this article Print

Accenture's settlement with the federal government for $63.7 million ends the DOJ case that alleged Accenture pushed certain vendors' brands in return for favorable treatment for those vendors. But isn't that a standard practice among channel partners and vendors? Here's a look at what happened and what it means for the channel.

Last week Accenture agreed to pay $63.7 million to the U.S. Department of Justice to settle a long-running case against it in which the government and two whistleblower former employees claim it received kickbacks from vendors to sell products to government agencies at inflated rates, but the IT consultancy still insists the payments it received from vendors was part of alliance benefits channel partners receive for working with vendors.

"Accenture did not admit guilt in the settlement so we can't assume that they did anything wrong.  The lines are pretty grey on the kickbacks though," says Jeff Hine, consulting analyst of channel programs for Enterprise Strategy Group.  "Assuming they received the alleged kickback from the hardware (and) software vendors who benefited, how is this really any different than referral or influence fees that are paid out as part of some vendors’ standard channel programs?" 

In its prepared statement in the matter, Accenture says the government agency liaisons it works with should know about how channel relationships work between consultants and vendors and that it was settling the case to get it off the books and move on.

 "The U.S. federal government was aware of alliance relationships in the IT industry and how they would benefit customers, vendors and the IT industry," Accenture's statement said. "The details of how alliances worked in the IT industry were widely reported in the industry press."

Filed in the U.S. District Court for the Eastern District of Arkansas several years ago, the lawsuit was first started by Norman Rille and Neal Roberts, a former employee and a lawyer specializing in fraud cases brought to light by whistleblowers. In 2007 the Department of Justice joined their crusade as plaintiffs more than two years after they filed. Together the agency and the whistleblowers accused Accenture, along with HP, EMC, Computer Sciences and dozens of other vendors in several additional lawsuits, of passing tens of millions of dollars amongst themselves to have Accenture give the vendors involved preferential treatment within government contracts.

To date, the government had already received tens of millions in settlement money from a number of technology vendors accused of the kickbacks. Last year HP paid $55 million and EMC $87.5 million to settle the charges. Cisco Systems and distributor Westcon Group North America also paid the government $48 million to settle a different but similar dispute, a settlement for which the Department of Justice agreed to dismiss the Accenture case against it.

Though the government is not announcing how much Rille and Roberts will receive for their part in the case, both men filed their suits under the U.S. False Claims Act, which entitles them to between 15 and 30 percent of the settlement funds.

"While I can't defend any unethical or illegal activity if it happened, I think there is an irony here that Accenture was accused of kickbacks, and those who accused them will be getting a big "kickback" under the government's own whistleblower program in the form of a percentage of the settlement," Hine says.

Because none of the cases went to trial, it is still difficult to say how these lawsuits will affect vendors and their partners who work with government agency. Without any judgment or admission of wrongdoing, no precedence has been set. However, there is no guarantee that similar cases won't be brought against the industry again. According to Hine, the case should at least be a warning for better transparency with end customers.

"Perhaps in the long run, it will turn into a matter of transparency, and customers should demand from their partners visibility into where they have agreements for referral fees in place," Hine says.