US Justice Department Joins False Claims Act Lawsuit against Software Giant CA, Inc. Alleging Fraudulent Pricing Scheme

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Vogel, Slade & Goldstein announces whistleblower lawsuit alleging that CA, Inc. sold software to U.S. agencies at inflated prices.

The U.S. Department of Justice announced today that it has intervened in a qui tam (whistleblower) False Claims Act lawsuit alleging that CA, Inc., a Fortune 500 company headquartered in Islandia, NY and a major supplier of software to federal agencies, knowingly misrepresented its pricing and discounting practices during price negotiations with the General Services Administration (“GSA”), which led to the government buying CA products at inflated prices.

The qui tam lawsuit, which was brought by a former sales division head for a CA subsidiary, was filed under seal in 2009 in the U.S. District Court for the District of Columbia by the Washington DC whistleblower law firm Vogel, Slade & Goldstein. The suit was first made public today.

The GSA negotiates contracts with vendors to sell software products to government customers at agreed-upon prices. GSA’s objective, when negotiating vendor contracts, is to take advantage of the fact that the federal government is a very large purchaser of the products. GSA seeks to leverage the buying power of the federal government as a whole to obtain favorable pricing typically available to very large commercial customers, as individual government offices or agencies may not purchase large quantities of any particular product. Consequently federal law requires vendors to disclose to GSA the discounts made available to other commercial users of the same products.

“For many vendors, the U.S. government is the largest customer,” said the whistleblower’s lawyer Robert Vogel. “The government has the right to get the same kind of pricing concessions that other large customers get.”

According to the lawsuit, CA sold licenses for numerous software products under its GSA contracts for over a decade. In order to be able to use these licenses year after year, and to get technical support and upgraded versions of the software, government customers were also required to pay annual usage and maintenance fees. The lawsuit alleges that during GSA contract negotiations, CA misrepresented to the Government the nature and extent of the pricing discounts that the company was providing to its commercial customers for both software licenses and maintenance services. The lawsuit alleges that, as a result, GSA unwittingly agreed to prices that were significantly higher than the prices paid by other commercial customers who were purchasing the same products and services.

The qui tam lawsuit alleges that CA offered the government small discounts off the company’s list prices for annual maintenance services for mainframe computer licenses purchased by government customers. At the same time, the lawsuit alleges, CA was routinely offering far larger discounts to other commercial customers who were purchasing maintenance on the same products.

The whistleblower complaint alleges that the Government may have suffered damages in excess of one hundred million dollars as a result of CA’s alleged misrepresentations.

The case number is Civil Action No. 09-1600 (D.D.C.).

Read the Qui Tam Complaint.

Read the U.S. Complaint-in-Intervention.

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Janet Goldstein
Vogel, Slade and Goldstein, LLP
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