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Uncle Sam sues Oracle (again) for alleged fraud

DoJ doubles down on whistleblower suit

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The US Department of Justice has filed a fresh lawsuit against Oracle, three months after intervening in a whistleblower suit that accuses the software giant of overcharging the government by "tens of millions of dollars."

Paul Frascella, formerly senior director of contract services at Oracle, filed the original lawsuit back in 2007, alleging that Oracle did not give the US government the same levels of discounts it did for commercial customers, something that's required by the General Services Administration, which does contract processing for US government agencies. In essence, if Oracle provides discounts for commercial customers, it's required to automatically update its GSA pricing schedules and discount levels so the government receives the same discount. Frascella left Oracle in late 2008.

The DOJ joined Frascella's lawsuit in April, and it has now filed its own complaint against Oracle under the False Claims Act. It alleges that Oracle defrauded the US government on software contracts that were in effect from 1998 to 2006 involving hundreds of millions of dollars in revenues for Oracle. You can see the DOJ's amended complaint here, which was filed today in the US District Court for the Eastern District of Virginia. The government is alleging breach of contract, fraud in the inducement, fraud by omission, payment by mistake, and unjust enrichment on the part of Oracle. It's seeking treble damages because it believes Oracle willingly undertook the fraud.

In a nutshell, the suit alleges that Oracle told the GSA that typical commercial customers received discounts ranging from 20 to 40 per cent if they bought between $650,000 and $5m in goods and services, that Oracle's discounting was much deeper than that. It also alleges that Oracle did not, as it told the government, stick to a very precise discounting schedule for commercial accounts except for "national and large accounts" that represented only 5 per cent of its business and that had discounts ranging from 40 to 70 per cent, depending on the deal.

According to the lawsuit filed by the DOJ, Oracle went through lots of contortions to try to avoid triggering amendments to the GSA as it did deals, including pushing deals through resellers, selling term licenses, making them limited use, and compelling customers with deep discounts on small deals more than $200,000 to keep them compliant with the GSA schedule.

"We take seriously allegations that a government contractor has dealt dishonestly with the United States," said Tony West, assistant attorney general for the Civil Division of the Department of Justice in a statement. "When contractors misrepresent their business practices to the government, taxpayers suffer." ®

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