California Company Pays to Settle False Claims Act Case

California-based software company Oracle Corp., the second-largest software maker in the world, reached a settlement in a False Claims Act case that one of the company's employees filed in 2007. The settlement is the largest that the General Services Administration (GSA) has ever obtained under the False Claims Act. The case shows how employees can act as whistleblowers under federal and state False Claims Acts.

Details of the Settlement

Oracle employee Paul Frascella filed a suit under the False Claims Act in 2007, claiming that the company violated the terms of the 1998 contract that Oracle entered into with the GSA to sell software licenses and provide technical support. The contract obligated Oracle to provide the GSA with its commercial pricing and policies. Frascella alleged that Oracle offered other customers discounts of up to 92 percent, while only giving the GSA discounts of 25 to 40 percent, and made false statements to the GSA about the discounts to other customers.

The Department of Justice (DOJ) joined Frascella's case in 2010. In October 2011, Oracle agreed to pay $199.5 million to settle the case. Under the False Claims Act rules, Frascella will receive $40 million.

Federal False Claims Act

The False Claims Act allows the government to bring suit against those who knowingly submit false statements for payment of government funds for three times the damages the government sustains, along with civil penalties of $5,500 to $11,000 per false claim. The government realized that with its limited resources it needed to join forces with citizens to help combat fraud, so in 1986 and 2009 Congress amended the False Claims Act to strengthen it, including the qui tam provisions of the act, which allowed individuals to file suits against those violating the False Claims Act and receive 15 to 25 percent of the funds that the government recovers. The DOJ has recovered over $7.8 billion under the False Claims Act since January 2009.

State False Claims Act

Like many other states, California has a state False Claims Act. The state's False Claims Act operates in a similar manner to the Federal Act, allowing the state to sue any person or business who knowingly makes false claims in order to receive payment or property from or to avoid making payments to the California government. The Act allows the state to recover treble damages and civil penalties, similar to the federal False Claims Act. California's False Claims Act also has a qui tam provision, so individuals may file suits to enforce the state's Act and receive a portion of the money the state recovers in the case.

Employees of a company are often in the best position to know when a company is committing fraud on the government, which is why the False Claims Act allows for qui tam actions. If you believe your company is engaging in fraudulent behavior, consult an experienced whistleblower attorney who can discuss your situation and options with you.