In May of 2007, an Oracle employee filed a lawsuit against Oracle for defrauding the United States federal government. Recently, the federal government joined the lawsuit against Oracle.
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Paul Frascella, the whistleblower, was a contract specialist for Oracle. He claims that Oracle did not disclose discounts that the company granted to favored commercial clients, thereby cheating the government out of millions of dollars. Contractors are required to give the government their best prices; accordingly they have to declare any discounts they give to other customers so that they can give the same discount to the government.
Frascella alleges that Oracle told employees that the discount disclosure requirement only applied to database and computer tools, not enterprise software. Also, Oracle told employees that the restrictions did not apply to transactions with net fees below $200,000, when in fact they do. Oracle contract managers supposedly expressed concern about the violation of the General Services Administration regulations but high-ranking officials, including Oracle’s VP of Global Practices, Ellen Eder, refused to respond to their complaints in writing to avoid a paper trail. Oracle declines to comment on the matter.
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Frascella filed the suit against Oracle under the False Claims Act, which allows individuals whom are not affiliated with the government to sue on behalf of the government. Informally, this act is known as “whistleblowing”. Citizens can receive up to 25% of the recovered funds.
There have been several whistleblower cases, recently. In May, EMC settled with the Department of Justice and agreed to pay the government $87.5 million. NetApp settled with the government for $128 million, in April of 2009. In the NetApp case, the whistleblower, Igor Kapuscinski, received 19.2 million as part of the settlement.
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