Oracle sued by U.S. for alleged overcharging

IDG News Service - Oracle is being sued by the U.S. government for allegedly overcharging it by millions of dollars, according to documents on file in U.S. District Court for the Eastern District of Virginia.

The government's action, filed in April, joined an earlier complaint filed by an Oracle employee, Paul Frascella, in May 2007. Frascella's complaint was unsealed as part of the government's move.

The U.S. General Services Administration (GSA) often works out "multiple award schedule" contracts with vendors such as Oracle, the suit states. Once in place, the MAS contract lets vendors list their products and prices in a catalog from which government agencies can make purchases without dealing with the usual red tape caused by procurement regulations.

But the contracts, known as "GSA Schedules," are supposed to provide discounts that are as good as or better than that given to the vendor's most favored customers, the complaint states.

"The whole idea of GSA schedule discounts is that the government, in the aggregate, is likely to be one of the largest purchasers of a company's products, and is entitled to take advantage of the discounts that its large buying power should command," it adds.

However, Frascella learned that Oracle was finding ways around the GSA restrictions in order to give commercial customers even deeper discounts, according to the complaints. One alleged practice saw Oracle "selling to a reseller at a deep discount ... and having the reseller sell the product to the end user at a price below the written maximum allowable discounts," it states.

Overall, Oracle's actions cost U.S. taxpayers "tens of millions of dollars," it adds.

Frascella's action was filed under the False Claims Act, which allows whistleblowers to sue parties they believe have committed fraud against the government. Whistleblowers typically stand to receive a portion of any damages obtained as a reward.

An attorney for Frascella, Christopher Mead, did not immediately return a call for comment.

Frascella had been hired by Oracle in 1997 as a contract specialist, according to his filing. Mead told Bloomberg News that Frascella no longer works for Oracle.

An Oracle spokeswoman declined comment.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com