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Oracle May Face $1 Billion in Fines



Oracle Corporation, the world’s second-largest software maker, has been accused of defrauding the government, resulting in damages of up to $1 billion.  The U.S. Department of Justice lawsuit against Oracle claims that Oracle overcharged the government for software.  For eight years the government bought software from Oracle, being promised discounts that were never received in full.  When meeting with the General Services Administration (GSA), Oracle promised discounts to the government that are typically offered to favored commercial customers.  These discounts of up to 92 percent of the cost of the products convinced the GSA to buy $1.08 billion worth of software from 1998 to 2006.  However, Oracle only gave the government a 25 to 40 percent reduction on the prices.  Because the discounts were applied at scheduled rates, Oracle did not have to bid for the contract each time it sold the software.  The software bought was distributed to over 21 government agencies.

Fines are expected to be around $1 billion based on how much the government was overcharged.  According to Patrick Burns, a spokesperson for Taxpayers Against Fraud, if Oracle overcharged by 35 percent or more, the fines could be more than $1 billion.  However, the claims state that in some circumstances the government was overbilled by 50 to 60 percent.  The claim states that Oracle defrauded the government by lying about discounts before entering the contract with the government and by not providing full information about discounts to private customers.

Source: Voreacos, David. “Oracle Damages in False Claims Case May Reach $1 Billion.” Boomberg. 5 August 2010.



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