Oracle accused of overcharging U.S.
The Justice Department has joined a whistle-blower in accusing Oracle of defrauding the federal government by overcharging for software.
In a civil suit filed in federal court, the Justice Department responded that Oracle had failed to give the government the same discounts on software that it provided to commercial customers.
A contract in place with Oracle from 1998 to 2006 required that Oracle notify the government of fluctuations in the price of its products and to match discounts made to commercial clients, according to the complaint.
Tony West, the assistant attorney general for the Justice Department’s civil division stated that serious allegations will be taken that a government contractor has dealt dishonestly with the United States.
Paul Frascella, a former Oracle employee, acted as a whistle-blower in May 2007 by lodging a complaint against Oracle on similar grounds. In April, the government provided notice that it would look into the matter and now it led to a joint complaint with the previous one.
Oracle’s internal communications explains how the employees haggle about the structure of certain software deals and discounts they give to commercial customers might affect policies tied to government contracts.
According to the complaint, Oracle sold $1.08 billion of software under the contract to the government agencies, including the Defense, Education and Justice Departments and the military.
Oracle remains the dominant player in the market for database software used to store critical information. It also competes in the broader market for business software against I. B. M., Microsoft and SAP.
Many customers have complained to Oracle and SAP in recent years about the high fees charged for maintenance contracts lasting a number of years.
Jonathan Eunice, a technology analyst at Illuminata said that people feel like they have already bought the software and its capabilities and yet they have to continue shelling out a significant amount of money.
The charges against Oracle were filed under the False Claims Act. The government could receive up to three times the damages it incurred and will pursue the case through the civil division and the United States attorney’s office in the Eastern District of Virginia.
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