DoJ Sues Oracle Alleging Software Contract Fraud

Justice Department claims the company defrauded the federal government on a software contract worth hundreds of millions of dollars over an eight-year span.


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The U.S. Justice Department on Thursday said it has filed a lawsuit against Oracle, accusing the database and business-applications-software titan of defrauding the federal government on a massive software contract worth hundreds of millions of dollars between 1998 and 2006.

In its lawsuit, the DoJ alleges Oracle (NASDAQ: ORCL) misrepresented its commercial sales practices, causing government customers to receive deals that were inferior to those Oracle gave to its private-sector clients.

The DoJ brought the complaint under the False Claims Act, and asserts that Oracle ripped off the federal government and U.S. taxpayers on a General Services Administration (GSA) software contract.

Under the contract, according to the DoJ complaint, Oracle was required to update GSA when it offered new commercial discounts and extend the same pricing improvements to government customers.

The lawsuit further claims that Oracle misrepresented its true commercial sales practices, resulting in government customers receiving deals "far inferior" to those it gave to private-sector customers.

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

Oracle officials were not immediately available to comment on the lawsuit.

DoJ officials said the lawsuit was brought originally by Paul Frascella, Oracle's senior director of contract services.

"The False Claims Act allows private citizens with knowledge of fraud to file whistleblower suits on behalf of the United States and share in any recovery," DoJ officials said in a statement. "If the United States intervenes in the action and proves that a defendant has knowingly submitted false claims, it is entitled to recover three times the damage that resulted and a penalty of $5,500 to $11,000 per claim."

Oracle is just the latest technology giant to find itself in the crosshairs of a DoJ lawsuit or probe, joining the likes of IBM (NYSE: IBM), Google (NASDAQ: GOOG) and, most famously, Microsoft (NASDAQ: MSFT).

Last month, Oracle soared past analysts' profit and sales estimates, pocketing $3 billion, or $0.60 a share, on sales of $9.6 billion in its fourth quarter.

Oracle shares closed off $0.58 a share, or 2.4 percent, to $23.70 in Thursday trading.

Larry Barrett is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

Tags: Oracle, software licenses, lawsuits, DOJ, fraud

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