Oracle to pay $199.5 million for overcharging US government

Software giant Oracle Corporation has agreed to pay $199.5 million plus interest to settle allegations that it overbilled the federal government for nine years, the US Justice Department (DoJ) yesterday said.

A former Oracle employee, Paul Frascella, had filed a suit against the company in 2007 under the False Claims Act, which provides financial rewards to people who report fraud against the government.

As a whistle-blower, Frascella will take home $40 million as his share of the recovery in the case, according to the DoJ.

The DoJ had alleged that the US General Services Administration (GSA), which negotiates contracts for the government, had contracted to buy $1.08 billion worth of software from Oracle from 1998 to 2006.

The DoJ says that Oracle falsely promised the same discounts offered to favoured commercial customers, but the company knowingly made false statements to GSA about its sales practices and discounts and gave government customers inferior deals to those given to its commercial customers.

''Oracle knowingly failed to comply with the price reduction clause of its GSA contract by not disclosing to GSA discounts Oracle gave to its commercial customers when they were higher than the discounts that Oracle had disclosed to GSA, and by failing to pass those discounts on to government customers. Because of these allegedly fraudulent dealings, the United States alleges that it accepted lower discounts and ultimately paid far more than it should have for Oracle products, said the DoJ in a statement.