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IBM Inks $14.8 Million False Claims Act Settlement

Posted  June 18, 2019

On Friday, the Department of Justice announced that IBM and its subsidiary Cúram Software had agreed to pay $14.8 million to resolve allegations that they lied to the State of Maryland while bidding on a contract to develop the state’s Health Insurance Exchange (HIX) website and IT platform. DOJ sued IBM under the False Claims Act, which imposes liability on companies and individuals that defraud government programs ranging from publicly-funded healthcare to defense procurement.

DOJ alleged that Cúram submitted a misleading bid to the State of Maryland in December 2011, the same day that IBM acquired the Irish company. Cúram doubled down on its alleged misrepresentations during a live presentation in January 2012, demonstrating software purportedly capable of calculating tax credits, making coverage eligibility determinations, addressing major life event changes, and interacting seamlessly with another subcontractor’s HIX software. When Maryland awarded the prime contract a month later, Cúram won a spot as a subcontractor.

However, according to the government, Cúram misrepresented the existing functionality of the software, which did not perform as advertised when the HIX website launched in 2013. Among other things, the software allegedly caused some consumers’ coverage applications to be lost or suspended. Cúram’s alleged failures were just one piece of a much larger failure. The HIX website crashed on its opening day, and Maryland ultimately recouped $45 million from prime contractor Noridian Healthcare Solutions LLC.

In announcing the settlement, assistant attorney general Jody Hunt emphasized that “making misleading statements to win contract awards violates fundamental tenets of government contracting and harms the government and taxpayers.” Hunt further noted the DOJ’s commitment to “protecting the American taxpayer from false claims and preserving the integrity of federal funding decisions.” Although the DOJ did not have the assistance of a whistleblower, the False Claims Act rewards individuals who come forward with information about fraud under the law’s Qui Tam provisions. If a Qui Tam lawsuit had formed the basis of the settlement with IBM, the whistleblower would have received between 15 and 30% of the $14.8 million.


Tagged in: Contract Non-Compliance, Defense Contract Fraud, FCA Federal, FCA State, Importance of Whistleblowers,