US Government Takes Legal Actions against Oracle
The Department of Justice decided to sue Oracle alleging that the latter didn’t offer the government the same discounts it offered to non-government customers. According to the Department of Justice, Oracle defrauded the government out of tens of millions of dollars because it did not offer the government the same discounts for large orders as it did to other customers.
Initially the action against Oracle was brought by Paul Frascella, a former employee, who sued the company under the False Claims Acts. Frascella accused Oracle of a “scheme...to defraud the United States government by failing to disclose deep discounts offered to commercial customers.”
Frascella filled a complaint under the False Claims Act back in May 2007. The False Claims Act allows whistleblowers to take action on behalf of the government and in exchange, get a cut of any payout. The case, which has been initially sealed, has now been unsealed and the U.S. Justice Department has jumped on board.
In the complaint it is said that the US General Administration (GSA) set up a “multiple award schedule” of contracts with suppliers. In a catalog, it listed products and prices thus making it easier for government agencies to purchase new software. The catch is that in Oracle’s case the prices in the list did not match the commercial discounts. Under General Services Administration contracts, the government must get “best price given to the most favored customer”.
Oracle used tactics such as selling to resellers in order to offer non-government customers significant discounts. Oracle would sell to product to a reseller, then the reseller would sell to the product to Oracle’s customer – this way the customer got a price well below the GSA minimum. “Oracle knowingly and recklessly employed these techniques to offer commercial customers deeper discounts without offering those deeper discounts to the US government,” says the complaint.
Initially the action against Oracle was brought by Paul Frascella, a former employee, who sued the company under the False Claims Acts. Frascella accused Oracle of a “scheme...to defraud the United States government by failing to disclose deep discounts offered to commercial customers.”
Frascella filled a complaint under the False Claims Act back in May 2007. The False Claims Act allows whistleblowers to take action on behalf of the government and in exchange, get a cut of any payout. The case, which has been initially sealed, has now been unsealed and the U.S. Justice Department has jumped on board.
In the complaint it is said that the US General Administration (GSA) set up a “multiple award schedule” of contracts with suppliers. In a catalog, it listed products and prices thus making it easier for government agencies to purchase new software. The catch is that in Oracle’s case the prices in the list did not match the commercial discounts. Under General Services Administration contracts, the government must get “best price given to the most favored customer”.
Oracle used tactics such as selling to resellers in order to offer non-government customers significant discounts. Oracle would sell to product to a reseller, then the reseller would sell to the product to Oracle’s customer – this way the customer got a price well below the GSA minimum. “Oracle knowingly and recklessly employed these techniques to offer commercial customers deeper discounts without offering those deeper discounts to the US government,” says the complaint.
