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Oracle Pays $98.5 Million PeopleSoft Fine

Oracle  agreed to pay a $98.5 million fine Tuesday for inaccurate pricing disclosures made by PeopleSoft to the U.S. General Services Administration (GSA).

The payment is the largest ever obtained by the United States in a civil settlement under the False Claims Act involving the GSA's Multiple Award Schedule (MAS) program.

James A. Hicks, a former PeopleSoft employee, initiated the case under whistleblower provisions of the False Claims Act. Hicks will receive $17.7 million of the total recovery as his statutory award.

Due to Oracle's Dec. 2004 $10.3 billion acquisition of PeopleSoft, it inherited PeopleSoft's liability under the GSA contract.

"PeopleSoft was the exclusive focus of the [lawsuit] recently settled. Oracle cooperated fully with the government in its investigation of the PeopleSoft GSA contract and conduct at issue in the suit," Oracle spokesman Bob Wynne told internetnews.com by e-mail.

"Oracle was not aware of the suit at the time of the acquisition. Oracle is pleased to have fully resolved this legacy PeopleSoft suit and all claims under the PeopleSoft contract."

According to the Department of Justice (DoJ), PeopleSoft provided the GSA a pricing schedule for software licenses and related maintenance services that were "not current, accurate and complete."

As a result, the DoJ claims, most federal buyers under PeopleSoft's contract paid inflated prices from March of 1997 to September of last year.

"All companies that want to avoid their disclosure obligations while selling products to the United States government are on notice today that we will use the False Claims Act and all other civil legal tools at our disposal to fight fraud and abuse," Assistant Attorney General Peter D. Keisler said in a statement.

Under the MAS Program, vendors disclose their commercial pricing policies and practices in exchange to gain access to the federal marketplace. The arrangement allows companies to sell to hundreds of government vendors under one central contract.

"The program works well when vendors follow the disclosure rules and provide GSA with the information it needs to negotiate good prices for government purchasers," said Deputy Attorney General Paul J. McNulty.

"This agreement demonstrates the Department's determination to hold vendors accountable for abusing GSA's trust and damaging its programs."

The DoJ alleges PeopleSoft understated the discounts it provided to commercial customers, including failing to disclose the true nature of the company's multiple product discounting practices.

Under that program, buyers are offered incrementally steeper discounts off list prices based on the number of products purchased at any one time.

According to the DoJ, PeopleSoft's understated discounting, combined with the use of non-standard discounts, caused at least one customer to obtain discounts of up to 74 percent off the listed price.

The GSA relied on the faulty disclosures and negotiated discounts for federal customers that were much less favorable than the total discounts PeopleSoft's best commercial customers enjoyed.

"PeopleSoft misled and overcharged the government for years," said GSA Inspector General Brian D. Miller.