Oracle to Pay $99 Million Settlement

Government Says Oracle's PeopleSoft to Pay $99 Million for Overcharging on Contracts

By Lara Jakes Jordan, Associated Press Writer

WASHINGTON (AP) -- Software maker Oracle Corp. agreed Tuesday to pay $98.5 million to settle complaints that it overcharged the government for nearly a decade on a slew of contracts, Justice Department officials said.

The settlement with Oracle's PeopleSoft kicked off what the department called a crackdown on waste, fraud and abuse in federal contracts.

"Criminals who cheat the government must be identified, stopped and punished," Deputy Attorney General Paul McNulty told reporters in Washington. He estimated that 5 percent of federal agencies' annual revenues is wasted on faulty or otherwise illegal contracts.

The case against Redwood Shores, Calif.-based Oracle Corp. is the largest settlement from a single company that had multiple contracts with the General Services Administration, McNulty said. Between 1997 and 2005, he said, the government "paid vastly inflated prices" for computer software and maintenance for human resources and financial systems for 60 federal agencies.

The federal investigation followed a complaint against PeopleSoft by a former employee, James A. Hicks, who tipped off officials that the government was not receiving discounts for buying multiple products and services -- as other clients were given.

Hicks will receive $17.7 million -- 18 percent of the settlement -- for his complaint as allowed under federal whistle-blower provisions.

Oracle said the complaints originated with PeopleSoft, which Oracle purchased in January 2005 for $11.1 billion after an 18-month hostile takeover battle. The deal created the world's second-largest business software manufacturer after Germany's SAP AG.

"Oracle was not aware of the suit at the time of the acquisition," said Oracle spokesman Bob Wynne. "Oracle is pleased to have fully resolved this legacy PeopleSoft suit and all claims under the PeopleSoft contract."

In all, the government paid about $300 million to PeopleSoft's office in Bethesda, Md., which was responsible for selling software products to federal agencies. U.S. Attorney for Maryland Rod J. Rosenstein called the case the largest fraudulent federal contract settlement in state history.

The Justice Department's new task force is modeled in part after efforts to track relief money and contracts rushed to the Gulf Coast last year after Hurricane Katrina, which has so far yielded 400 investigations into complaints or criminal cases.

McNulty said the task force also will closely monitor spending to military contractors, and noted an increase in prosecutions of contracts involving reconstruction efforts in Iraq. Inspectors from about 25 federal agencies will participate in the task force.

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