Oracle pays up for price gouging

Oracle has agreed to pay a fine of $98.5 million to settle charges that its subsidiary Peoplesoft deliberately overcharged the US government when servicing its General Services Administration (GSA) Multiple Award Schedule (MAS) program.

The problems occurred between March 17, 1997 and Sept. 30, 2005, and involved Peoplesoft staff giving incorrect pricing information for software licenses and related maintenance services. Oracle purchased Peoplesoft in January 2005 after a hostile takeover and has liability for the fine.

"GSA's Multiple Award Schedule program serves vendors and government purchasers by eliminating red tape while insuring that government agencies get a fair deal for the American taxpayer's procurement dollars," said US deputy Attorney General McNulty.

"The program works well when vendors follow the disclosure rules and provide GSA with the information it needs to negotiate good prices for government purchasers. This agreement demonstrates the Department's determination to hold vendors accountable for abusing GSA's trust and damaging its programs."

The case hinged around advice given to government bodies about the prices they could expect to pay. The government says that the company understated the discounts it gives to private companies and concealed the level of discounts given for volume licence purchase.

"Because PeopleSoft did not give GSA accurate pricing information, it negotiated higher prices for its products and services than it would have obtained if GSA had known the truth," said United States Attorney Rod J. Rosenstein of the District of Maryland.

"The substantial recovery in this case will help to ensure that vendors provide truthful information and the government pays a fair price for products and services."

The decision will also make one former employee of Peoplesoft very, very rich. James A. Hicks alerted the government to the practices of his employers and will receive a reward of $17,730,000.