HP settles whistleblower lawsuit for $55 million

Monday - 8/30/2010, 8:42pm EDT

By Jason Miller
Executive Editor
Federal News Radio

Technology giant Hewlett-Packard will pay a fine of $55 million for violating the False Claims Act.

The Justice Department announced today that HP wants to settle the case alleging it paid kickbacks, or "influencer fees," to systems integrators in return for recommendations to agencies to buy their products.

Justice said in a news release that the settlement also resolves claims that HP's 2002 contract with the General Services Administration was defectively priced because HP provided incomplete information to GSA contracting officers during contract negotiations.

"Contractors must deal fairly with the government when doing business with federal agencies," said Tony West, assistant attorney general for the Civil Division at DoJ. "As this case demonstrates, we will take action against those who seek to taint the government procurement process with illegal kickbacks."

HP now joins a growing list of companies settling with the government or facing charges of violating the False Claims Act. In July, DoJ joined a False Claims Act lawsuit against Oracle, and settled a case with EMC and Network Appliance in 2009. Justice also settled kickback allegations similar to HP's involving IBM for $2.9 million, Computer Sciences Corp. for $1.37 million and PriceWatershouseCoopers for $2.3 million.

Justice intervened on the case against HP in April 2007.

HP's decision to settle is the fourth of five False Claims allegations made by Norman Rille and Neal Roberts, who filed in the U.S. District Court for the Eastern District of Arkansas in 2004. Rille and Roberts are entitled to a share of the money recovered by the government. Rille and Roberts also filed against IBM, CSC, PWC and Accenture. Only Accenture has not settled yet.

Rille and Roberts claim that IBM, CSC, PWC and Accenture received extra money for promoting HP products on contracts they worked on.

Additionally, Justice stated HP disclosed the defective pricing allegations resolved by today's settlement to GSA contracting officials in 2007, nearly five years after signing a schedule contract to sell computer equipment and software.

Vendors are required under federal acquisition policy when applying for a GSA schedule contract to provide the agency with information about its consumer business practices. The goal is for GSA to negotiate a fair price for the government, Justice stated.

DoJ said HP informed GSA contracting officials in 2007 that it might not have complied with all applicable provisions of the GSA contract. This disclosure led to an audit by the GSA Office of Inspector General, which concluded that the contract had been defectively priced.

"Americans deserve the best deal possible when their hard-earned tax dollars are used," said GSA IG Brian Miller. "We will aggressively pursue companies that overcharge the government."

In a statement to Federal News Radio, an HP spokesperson said, "HP denies engaging in any illegal conduct in connection with these matters. We believe it is in the best interest of our stakeholders to resolve the matter and move beyond this issue."

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