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HP to pay $55 mn to settle fraud allegations

August 31, 2010 09:45 IST

Hewlett-Packard Co has agreed to pay $55 million to settle claims which it defrauded federal government, the US Justice Department said.

This settlement resolves allegations under the False Claims Act that HP knowingly paid kickbacks, or 'influencer fees', to systems integrator companies in return for recommendations that federal agencies purchase HP's products.

The settlement also resolves claims that HP's 2002 contract with General Service Administration was defectively priced because it provided incomplete information to GSA contracting officers during contract negotiations, the Justice Department said.

"Contractors must deal fairly with the government when doing business with federal agencies," said Tony West, assistant attorney general for the Civil Division of the Department of Justice.

The allegations that HP improperly paid kickbacks were first made in a lawsuit that whistleblowers Norman Rille and Neal Roberts filed in the US District Court for the Eastern District of Arkansas in 2004.

HP disclosed the defective pricing allegations resolved by today's settlement to GSA contracting officials.

In 2002, HP entered into a contract with GSA to sell computer equipment and software to federal agencies.

Under applicable regulations and contract provisions, HP was required to tell GSA how it conducted business in the commercial marketplace so that GSA could use that information to negotiate a fair price for government customers using the GSA contract to purchase HP products.

HP informed GSA contracting officials in 2007 that it might not have complied with all applicable provisions of the GSA contract.

The disclosure led to an audit by the GSA Office of Inspector General, which concluded that the contract had been defectively priced.

The United States has settled kickback allegations similar to those made in this case in matters involving IBM for $2.9 million, Computer Sciences Corporation for $1.37 million, and PWC for $2.3 million.

In addition, these same allegations were a part of a settlement with EMC Corporation which totalled $87.5 million.

The EMC settlement also settled defective pricing claims found through an audit by the GSA OIG.

Lalit K Jha in Washington
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