Oracle paying almost $200 million for bad sales practices

Oracle has been forced to pay the considerable sum of $199.5 million in the largest False Claims Act settlement yet dealt with by the General Services Administration. Both the Oracle corporation and Oracle America have agreed to pay over the massive sum, plus interest, after the lawsuit was settled by the GSA. The settlement stems from a lawsuit made by a former Oracle employee, according to ZDNet.

The employee, Paul Frascella, filed the lawsuit on behalf of the United States, following the whistleblower provisions of the False Claims Act. For filing the lawsuit, Frascella gets to hold onto $40 million of the settlement agreement. The case originated from a contract Oracle entered in 1998, with the GSA's Multiple Award Schedule program. The program provides the government and other GSA-authorized purchasers with a streamlined process for purchasing commercial goods and services.

Oracle did not follow through with the contract. By the time the dust settles from the lawsuit, the company will likely have paid out more than $200 million dollars. According to the lawsuit, the company made the following infringements:

  • Oracle lied to the General Services Administration about its sales practices and discounts.
  • Oracle did not provide current, accurate, or complete information about its sales practices and discount policy.
  • Oracle did not tell the GSA about discounts it gave to existing customers - which were higher than the discounts they had given the GSA and its associates.

Of course, the downside to these claims is that the lawsuit suggests the company knowingly made the infringements. If they are true, however, then Oracle has technically attempted to charge the United States government more than it charges companies within the United States for software. Suffice to say, the United States government would be angry with such a possibility, and because of the infringements, it isn't hard to see where the settlement fee comes from. Oracle released the following statement, despite the mess they found themselves in:

Oracle has settled a qui tam case with the General Services Administration relating to a contract that dates back 13 years ago to 1998. Oracle vigorously denies that it did not scrupulously adhere to the pricing requirements of that contract. The company has always had strong controls in place to insure that the government agencies who purchased from the GSA schedule received fair pricing. Oracle never committed any fraud whatsoever. Given that the events surrounding this case took place so long ago, not surprisingly many of the witnesses are no longer available or do not clearly recall these events. Oracle has therefore decided to avoid the distraction and high cost of litigating this case by settling. We remain committed to the highest principles of integrity in our relationships with Government customers.

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8 Comments

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If someone goes and makes a global assessment of Oracles practices in the market you will find so many malpractice and deception from Oracle. Yes they've got a great DB engine but besides that and buying Sun Java they have nothing except sheets of useless text. You guys need to look at Oracle in the Middle East and the evil they are spreading in the market.

And Larry Ellison has nerve to try to attack Microsoft saying they were squeezing out competition and blah blah?!

Oh and the USA is use to paying exobant proces for everything. I mean you think a hammer or tilet seat cost $6000?

The paint they use to paint the white house is one of the purest whites you can buy. Cost? Over $300 per gallon. Its just white paint. It doesn't cost $300 to make it as white as possible.

The USA was willing to pay Oracle what they asked without doing some price checking. All they had to do was use an inside IT guy, to make some friends with other company's; or just so a price shakedown to see if they were paying a fair price compared to others. They didn't need a whistle-blower to sneek and tell them.

TechieXP said,
And Larry Ellison has nerve to try to attack Microsoft saying they were squeezing out competition and blah blah?!

Oh and the USA is use to paying exobant proces for everything. I mean you think a hammer or tilet seat cost $6000?

The paint they use to paint the white house is one of the purest whites you can buy. Cost? Over $300 per gallon. Its just white paint. It doesn't cost $300 to make it as white as possible.

The USA was willing to pay Oracle what they asked without doing some price checking. All they had to do was use an inside IT guy, to make some friends with other company's; or just so a price shakedown to see if they were paying a fair price compared to others. They didn't need a whistle-blower to sneek and tell them.

Not defending Oracle at all, but it is common practice worldwide to sell for governments at higher prices than to the private sector. Much of this is due to higher risks when dealing with governments. There are many issues with goverment sales. Here are some examples:

- Delayed payments (which has impact due to interest, so there is some money the company may loose);
- Not received at all (probably not the case of the (US gov);
- Requirements changing during the process which implicate in higher costs for the company;
- Burocracy;
- In case of software, there are probably some non-contract customisation that companies find out at the moment of implementation;

Now, if the company had the possibility of charging less even counting all the risks, well, then it's another story...-

TechieXP said,
They didn't need a whistle-blower to sneek and tell them.
Actually, they did. The reason that the government is suing Oracle in the first place is because Oracle had been contractually obligated to charge the US Government the lowest rate charged to any of their licensees. Oracle used back-channels to work around that contract by offering discounts through third parties to customers, which resulted in rates lower than those offered to the government, which they contractually agreed to charge--at least--no more than anyone else.

Oracle was free to decline the contract and forego the US government as a customer. They chose to bind themselves by the contract, and then simply ignore it.

Oracle should have been forced to pay billions for their misgivings and, frankly, for their incredibly unethical fraud. The high price should serve both as punishment, and as a sign to others that think of acting similarly. I genuinely hope that the IRS is auditing their taxes, and back taxes, to catch them in whatever other act of fraud that they are likely committing.

On top of that, the government should have forced them to renegotiate an even better contract in light of the fact that they broke the existing one in one of the most egregious ways possible.

As it is, $200 million is a drop in the bucket for Oracle, and I would not be surprised if Oracle made over $200 million by not properly discounting the government's price to match the backwater, lower priced contracts.