Last week, the government intervened in a whistleblower lawsuit brought under the False Claims Act against CA Technologies, an IT software provider headquartered in New York. CA is accused of overcharging government customers for software under the terms of its “best price” contract with the General Services Administration.
The federal government requires suppliers to give them the same price and discounts they offer to other large customers or explain the reasoning behind any price discrepancy. During contract negotiations, they must provide information about their pricing policies. If, after entering into a contract with the government, the company provides larger discounts to their commercial customers, they are required to pass on those discounts to the government as well.
Instead, CA increased their discounts to commercial customers without telling the government about the lower prices they were charging. According to the lawsuit, a private sector customer paid $3,400 for a software license that the federal government was charged $34,487.
Dani Shemesh, an ex-employee of CA Israel Ltd., tipped the government off to the larger discounts. If the government successfully recovers money as a result of the allegations, Shemesh may be entitled to between 15 and 25 percent of the recovery as a whistleblower pursuant to the False Claims Act.
A Quick History of Best Price Litigation
There has already been one settlement this year of a case involving a company that failed to give a government body their best price. Office Depot paid $475,000 to settle allegations brought under the New York False Claims Act that it overcharged state government entities in New York. The contract required the office supply store to charge New York no more than it charged the U.S. government under its GSA contract.
In 2011, Oracle settled similar allegations related to their pricing and discounting policy with the Government. The settlement, $199.5 million, was the largest by a company for failure to meet the obligations of a contract with GSA. The whistleblower, a former Oracle employee, received $40 million for initiating the qui tam lawsuit.
The largest settlements for this type of litigation have been collected for Medicaid fraud. The Medicaid Rebate Statute requires pharmaceutical manufacturers to report prices to the government to ensure that Medicaid is not being overcharged. Drug companies have paid hundreds of millions to resolve allegations of overcharging and misreported prices.