Oracle paying $199.5 million for bad sales practices

At the close of Oracle OpenWorld 2011, not all of the latest Oracle-news is about looking forward towards new solutions and products.

Oracle Corporation and Oracle America have agreed together to fork over $199.5 million plus interest for "failing to meet their contractual obligations" in what is now the largest False Claims Act settlement that the General Services Administration has ever reached.

This settlement stems from a lawsuit by a former Oracle employee, Paul Frascella, who filed the suit on behalf of the United States, per the whistleblower provisions of the False Claims Act. Frascella will now walk away with a share of $40 million.

The case came about in the first place because of a contract Oracle entered into in 1998 with GSA’s Multiple Award Schedule (MAS) program, which provides the government and other GSA-authorized purchasers with a streamlined process for buy commonly-used commercial goods and services.

Well, apparently Oracle didn't follow through with that contract. Here are the reasons why Oracle is paying probably more than $200 million (don't forget about the interest):

• Oracle didn't provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers
• Oracle lied to the GSA about its sales practices and discounts
• Oracle didn't tell the GSA about discounts that it gave to its commercial customers when they were higher than the discounts that Oracle had given to the GSA

The stipulation here is that the case argues that Oracle "knowingly" did all of these things. Thus, Oracle never passed on those discounts to government customers, which is a big problem when you have a contract saying you'll do so. Therefore, the U.S. government is angry that they paid more for Oracle products than they should have, and any customer would naturally be upset over that.

Nevertheless, Oracle has issued the following statement:

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.

At least that's one legal mess that Oracle can get out of the way. Now the Redwood City, Calif.-based giant can back to its dealings with Google over that whole Android/Java debacle.

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