Businesses to Pay $75.5 Million for Overcharging Feds

VIRGINIA

Two businesses — VMWare and Carahsoft — agreed to pay $75.5 Million to settle claims that they hid pricing and overcharged the federal government, according to officials.

VMware Inc. and Carahsoft Technology Corporation violated the False Claims Act by misrepresenting their commercial pricing practices and overcharging the government on VMware software products and related services, the Department of Justice announced today.

VMware is a Delaware corporation that specializes in computer virtualization software and has its principal place of business in Palo Alto, California, officials said.

Carahsoft is a privately held Maryland corporation that distributes information technology products to federal, state and local governments and has its principal place of business in Reston, Virginia.

“We will continue to look into all allegations of false claims in GSA contracts,” said Acting Inspector General Robert C. Erickson of the U.S. General Services Administration (GSA). “I appreciate the hard work of our auditors, our agents and the attorneys on this complex case that has resulted in a large amount of money being returned to the United States.”

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the U.S. for false claims and obtain a portion of the government’s recovery, officials said.

The civil lawsuit was filed in Virginia by Dane Smith, who is a former vice president of the Americas at VMware Inc. Mr. Smith’s share of the recovery has not been determined.

These false statements allegedly concealed the companies’ commercial pricing practices and enabled the companies to overcharge the government for VMware’s products and services from 2007 through 2013, according to officials.

Under the Multiple Award Schedule (MAS) Program, officials said prospective vendors agree to disclose commercial pricing policies and practices to the GSA in exchange for the opportunity to gain access to the broad federal marketplace and the ease of administration that comes from selling to any government purchaser under one central contract.

GSA regulations require that, during contract negotiations with GSA, prospective vendors seeking an MAS contract make “current, accurate and complete” disclosures of the standard and non-standard discounts they offer to commercial customers, officials said.

Officials said the GSA relies on the accuracy of these disclosures in order to negotiate fair pricing for government purchasers.

Additionally, after the MAS contract is awarded, regulations require that MAS Program vendors disclose to the GSA changes in their commercial pricing practices, including improved discounts that are offered to commercial customers, after the MAS contract is in place.