Justice settles procurement case, launches anti-fraud effort

The Justice Department announced Tuesday that Oracle Corp. agreed to pay $98.5 million to settle allegations that PeopleSoft, which Oracle has since acquired, did not share accurate pricing information with the General Services Administration when it was negotiating for a listing on a multiple-award schedule in 1997.

Rod J. Rosenstein, U.S. attorney for the District of Maryland, said PeopleSoft did not inform GSA that customers could get discounts of 30 percent or more by buying more than one product at once. Because maintenance services also are tied to those prices, more than 60 agencies that used GSA's multiple-award schedule to purchase PeopleSoft software overpaid for maintenance services between 1997 and 2005, Rosenstein said.

Paul McNulty, deputy attorney general, said the settlement amount represents about a doubling of the estimated damages. About $17.7 million, or 18 percent, will go to the whistleblower, former PeopleSoft employee James Hicks.

Oracle spokesman Bob Wynne said that PeopleSoft was the exclusive focus of the case and that Oracle cooperated fully. He added that Oracle was not aware of the suit when it bought PeopleSoft. In an effort to promote the kind of collaboration that resulted in the Oracle settlement, McNulty also launched a national initiative to combat procurement fraud Tuesday. It will be based out of the Justice Department's Criminal Division and will involve U.S. attorneys, inspectors general and federal law enforcement groups.

McNulty created a similar group in February 2005 when he was U.S. attorney for the Eastern District of Virginia. That group brought together more than two dozen Defense and civilian agencies, including many of the same agencies involved in this new initiative. The group sought to boost the number of prosecutions for procurement fraud.

McNulty oversaw the 2005 prosecution of Michael Sears, the former Boeing Co. chief financial officer who secretly recruited former Air Force acquisition official Darleen Druyun. He said the new group, which takes his procurement fraud efforts to a national level, also is aimed at increasing prosecutions.

Procurement fraud includes misuse of classified information, price irregularities and labor rate abuse. Penalties may not be tough enough, McNulty said. Druyun, he said, received a light sentence -- nine months in jail -- after admitting to giving Boeing contracts preferential treatment in exchange for a top job with the company.

"Criminals who cheat the government must be identified, stopped and punished," McNulty said.

Alice Fisher, assistant attorney general, will oversee the new initiative.