EMC settles federal kickback lawsuit for $87.5 million

Information technology contractor EMC Corporation announced Tuesday it will pay $87.5 million to the government to settle lawsuits alleging the company provided kickbacks to business partners and misrepresented its pricing practices during negotiations with the U.S. General Services Administration (GSA).

The suit was originally filed in December 2006 by Norman Rille and Neal Roberts, under the False Claims Act; it alleged EMC submitted phony claims for information technology hardware and services on numerous government contracts from the late 1990s to the present. The original suit also named contractors Booz Allen Hamilton Inc., Acxiom Corporation, and Titan Corporation.

The Department of Justice joined the lawsuit against EMC in March 2009 as part of a "larger investigation of government technology vendors that has resulted in settlements to date with three other companies, with several other investigations and actions still pending," according to a statement from EMC. 

Rille, a former partner at PricewaterhouseCoopers, and Roberts, a former senior manager at Accenture, have also filed suits against several other technology contractors, including HP, Accenture and Sun Microsystems, accusing them of providing kickbacks to win government contracts. They have also settled cases with IBM and PricewaterhouseCoopers involving allegations of improper contracting practices.

"Misrepresentations during contract negotiations and the payment of kickbacks or illegal inducements undermine the integrity of the government procurement process," said Tony West, assistant attorney general for the Civil Division of the Department of Justice. "The Justice Department is acting to ensure that government purchasers of commercial products can be assured that they are getting the prices they are entitled to."

EMC spokesman Patrick Cooley told National Journal his company "has always denied and will continue to deny any liability arising from the allegations made in this case. We're pleased that the expense, distraction and uncertainty of continued litigation are behind us."

The lawsuit falls under the qui tam, or whistleblower, provision of the False Claims Act, which allows a private party to file action on behalf of the United States and receive a portion of the settlement. The law allows the government to recover up to three times the amount of its losses, plus civil penalties.

The government only joins a qui tam case if they find merit to the charges. In this instance, the investigation was conducted by the U.S. attorney's office in Little Rock, Ark. Justice's civil division, GSA's Office of the Inspector General (OIG), and other IGs joined the case before the Justice Department. 

"Companies should not keep charging higher prices to the Government when costs go down.  The American taxpayers deserve a better deal," said GSA Inspector General Brian Miller. "This case is another demonstration of the value of OIG audits."