CA Inc. to Pay $45 Million to Settle VSG Qui Tam Whistleblower Case Alleging False Claims to GSA
The U.S. Department of Justice announced on March 10, 2017 that it has settled a VSG qui tam (whistleblower) False Claims Act lawsuit alleging that CA, Inc., a Fortune 500 company headquartered in Islandia, NY and a major supplier of software to federal agencies, knowingly misrepresented its pricing and discounting practices during price negotiations with the General Services Administration (“GSA”), which led to the government buying CA products at inflated prices. Under the terms of the settlement, CA will pay the Government $45 Million.
The qui tam lawsuit, which was brought by a former sales division head for a CA subsidiary, was filed under seal in 2009 in the U.S. District Court for the District of Columbia by the Washington DC whistleblower law firm Vogel, Slade & Goldstein. The Department of Justice later elected to intervene in and pursue some of the claims in the lawsuit, while VS&G’s client continued to pursue other claims. The settlement calls for the Government to pay VS&G’s client a substantial reward for his role in initiating and pursuing the lawsuit.
The GSA negotiates contracts with vendors to sell software products to government customers at agreed-upon prices. GSA’s objective, when negotiating vendor contracts, was to take advantage of the fact that the federal government is a very large purchaser of the products. GSA sought to leverage the buying power of the federal government as a whole to obtain favorable pricing typically available to very large commercial customers, as individual government offices or agencies may not purchase large quantities of any particular product. Consequently federal law required vendors to disclose to GSA the discounts made available to other commercial users of the same products.
“For many vendors, the U.S. government is the largest customer,” said the whistleblower’s lawyer Robert Vogel. “The government has the right to get the same kind of pricing concessions that other large customers get, and not to be treated like a gravy train.”
According to the lawsuit, CA sold licenses for numerous software products under its GSA contracts for over a decade. In order to be able to use these licenses year after year, and to get technical support and upgraded versions of the software, government customers were also required to pay annual usage and maintenance fees. The lawsuit alleged that during GSA contract negotiations, CA misrepresented to the Government the nature and extent of the pricing discounts that the company was providing to its commercial customers for both software licenses and maintenance services. As a result, according to the lawsuit, GSA unwittingly agreed to prices that were significantly higher than the prices paid by other commercial customers who were purchasing the same products and services.