White House CIO’s Former Software Firm Settles False Claims Act Suit

The software company that recently employed federal chief information officer Tony Scott agreed to pay $75 million to settle claims that the company and a partner firm concealed commercial pricing and overcharged the government, the Justice Department announced last week.

Palo Alto, Calif.,-based VMware Inc. and Reston, Va.-based Carahsoft agreed to pay to resolve allegations that they violated the False Claims Act by “misrepresenting their commercial pricing practices and overcharging the government on VMware software products and related services,” said a statement from the U.S. Attorney for the Eastern District of Virginia. Justice worked with the inspector general for the General Services Administration to investigate the abuses on Multiple Award Schedule contracts.

“Transparency by contractors in the disclosure of their discounts and prices offered to commercial customers is critical in the award of GSA Multiple Award Schedule contracts and the prices charged to government agency purchasers,” said U.S. Attorney Dana Boente.

The “settlement demonstrates our continuing vigilance to ensure that those doing business with the government give the taxpayers a fair deal,” added Principal Deputy Assistant Attorney General Benjamin Mizer, head of Justice’s Civil Division. “Government contractors who seek to profit improperly at the expense of taxpayers face serious consequences.”

When agencies solicit contracts under GSA’s centralized Multiple Award Schedule program, competing vendors agree to reveal their commercial pricing policies and practices in exchange for the opportunity through GSA to gain access to governmentwide business opportunities. But regulations require that contractors disclose “current, accurate and complete” information on standard and non-standard discounts they offer their commercial customers.

The civil lawsuit against the firms was filed by whistleblower Dane Smith, who is a former vice president of the Americas at VMware Inc.  Smith’s share of the recovery has not been determined, Justice said.

GSA’s IG office said it will continue to examine potentially false claims in GSA contracts.

Correction: The original headline on this story incorrectly said the firms violated the False Claims Act. The firms settled the suit but denied wrongdoing.