If claims that Oracle attempted to 'stonewall' a whistleblower lawsuit and paid a $200 million settlement fee after the case appeared in court are shown to be true, then the firm may find itself on the wrong side of the law.
An investor of the enterprise software giant, Jordan Weinib, is suing the company -- claiming that CEO Larry Ellison and both his current and previous board of directors engaged in prolonged, unnecessary litigation over the whistleblower's accusations, when the directors allegedly knew the claims were true.
Due to this, $200 million dollars' worth of 'damage' was inflicted on Oracle, which in turn has consequences for its investors.
The settlement in question was the result of a whistleblower lawsuit filed in 2007 by previous employee Paul Frascella, who accused the company of violating price-reduction clauses in federal contracts, and extending discounts to select and restricted groups.
Therefore, Oracle failed to meet its contractual obligations to the General Services Administration (GSA) under the False Claims Act. The case was settled only after a lengthy and expensive process.
After Oracle paid $199.5m plus interest, Weinrib claims the high legal costs were due to the firm "digging in and litigating the matter", even though the CEO and his team allegedly knew the whistleblower's accusations were correct. Weinrib stated:
"The board forced the government to expend additional resources litigating the action when the board knew the company was in a significant liability position and that additional litigation would certainly raise the ultimate price of settlement."
By not mitigating losses created by the settlement, the shareholder claims that Oracle failed in its duty to both him and other shareholders. Weinrib is seeking an unspecified amount in damages.
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