July 2, 2015

DOJ Catch Of The Week — VMware & Carahsoft Technology

By the C|C Whistleblower Lawyer Team

This week’s Department of Justice “catch of the week” goes to VMware Inc. and Carahsoft Technology Corporation.  On Tuesday, the two companies agreed to pay $75.5 million to settle charges they violated the False Claims Act by misrepresenting their commercial pricing practices and overcharging the government on VMware software products and related services.  Palo Alto-based VMware specializes in computer virtualization software and Virginia-based Carahsoft distributes information technology products to federal, state and local governments.  See DOJ Press Release.

Government Service Administration (GSA) regulations require that prospective vendors seeking a contract under the government’s Multiple Award Schedule (MAS) Program make “current, accurate and complete” disclosures of the standard and non-standard discounts they offer to commercial customers. These regulations further require that MAS Program vendors disclose to the GSA changes in their commercial pricing practices, including improved discounts that are offered to commercial customers, after the MAS contract is in place.  The GSA relies on the accuracy of these disclosures in order to negotiate fair pricing for government purchasers.  According to the government, VMware and Carahsoft failed to comply with these GSA requirements.  Instead, they allegedly misrepresented their pricing practices in connection with the sale of VMware products and services under Carahsoft’s MAS contract.  The government claims these false statements concealed the companies’ commercial pricing and enabled them to overcharge the government for VMware’s products and services from 2007 through 2013.

In announcing the settlement, the government stressed the importance of government contractors dealing fairly and honestly with the government.  “Transparency by contractors in the disclosure of their discounts and prices offered to commercial customers is critical in the award of GSA Multiple Award Schedule contracts and the prices charged to government agency purchasers,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.  And Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division, cautioned: “Government contractors who seek to profit improperly at the expense of taxpayers face serious consequences.”

The allegations originated in a whistleblower lawsuit filed by Dane Smith, who is a former vice president of the Americas at VMware Inc., under the qui tam provisions of the False Claims Act.  He will receive a yet-to-be-determined whistleblower award from a portion of the government’s recovery.

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