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April 22, 2007
Sun Microsystems, Lurita Doan, and Tim Griffin Meet in Arkansas
by emptywheel
Unnoticed with the Virginia Tech news and the Alberto Gonzales flame-out, there was a weird case announced this week in Arkansas. The federal government was intervening in a whistleblower case launched against just about every big name in the IT world: Accenture (formerly Anderson Consulting), Sun Microsystems, HP, IBM, Cisco, Dell, Compaq, Microsoft ... everyone except Apple. The case had initially been filed by two whistleblowers on September 17, 2004; the government intervened into some of the cases (specifically, against Accenture, HP, and Sun) on December 13, 2006; and the case was unsealed this week, on April 19. I'll come back to the significance of those dates.
The Kickback Association
The case against Sun basically alleges that members of an Association including Sun would get a Systems Integration contract with the US government.Then, it would push contracts for other Association members, in exchange for kickbacks.
For example, Sun has entered into agreements with its Alliance Partners wherein it pays Kickbacks, as defined below, between and among themselves in the nature of anything of value, but not limited to, referral fees, influencer fees, systems integration compensation fees, reseller fees, commissions, free or discounted products and/or services, equity ownership, profit sharing, or other benefits.
As a result, millions of dollars of Kickbacks were sought, received, offered and paid between and among Sun and its Alliance Partners in violation of the False Claims Act and other federal statutes and regulations.
The main thrust of the suit alleges that these IT companies have established a system of kickbacks whereby they send each other business in return for payments.
Now, this kind of strong-arming has been going on as long as the computer business has existed--it's how IBM got big (full disclosure--I was born and bred in IBM culture, and my father was a significant player in IT contracting in the 1990s). But you're not supposed to do it with the Federal government. And, perhaps because the two whistleblowers brought a large amount of evidence describing the details and dollar amounts, the government is now trying to recoup the money that went to such kickbacks.
Sun's False Statements about Commercial Discounts
But there's an allegation specific to Sun, wihch is where Lurita Doan comes in. The suit alleges that:
Sun has also made false statements to the Government about its commercial sales practices and the discounts it offers to its commercial customers resulting in improperly negotiated pricing -- thus defective pricing -- on its sales of products and services to the United States Government. These false statements thus result in inflated and false claims being submitted to and paid by the Government.
This issue--Sun's misrepresentations about its commercial prices--was one of the issues Henry Waxman raised with GSA Administrator Lurita Doan in her March 28 appearance before the Government Oversight Committee.
Basically, in response to a hotline tip received in September 2004 (this coincides with the initial complaint on this suit, so it's likely the tip came from one of the whistleblowers who first brought the suit), the GSA realized that Sun was overcharging the government for its services. One contracting officer (CO) worked to bring Sun's discounts in line with government requirements. This CO was replaced in February 2006, but his replacement (the second CO) similarly tried to bring the Sun contract into line with the discounts normally required by the Federal government. Sun balked at this effort, and in August 2006, the second CO and the commissioner of the Federal Acquisition Service agreed to let Sun's contract expire on August 31.
But then Administrator Doan (who had assumed that position on May 31, 2006) got involved. Worried that if GSA ended Sun's contract, it would just go through a competing contracting agency and GSA would lose the contract, Doan demanded that the CO keep the contract. When he said he was unwilling to do so, given the results of the audits, he was reassigned. His replacement (the third CO) pounded through a new contract in five days, ceding even the discounts that Sun had been offering in the interim two years, much less the discounts normally accorded to the Federal government. And, apparently as a reward for pushing through this disadvantageous contract, the third CO got a transfer he had been seeking:
I have been told that the contracting officer accepted an offer that was inferior to a previous Sun proposal, with contract terms from Sun that the official's predecessors had rejected. I have also been told that shortly after concluding the Sun negotiatoin, the contracting officer recived a requested transfer from Washington, D.C., to Denver, despite having been previously refused such a transfer.
The thing is--not only did GSA know that Sun was ripping off the government. The second CO (the one that got reassigned) was also aware that DOJ might get involved in this case:
I also understand that during this period, the second contracting official learned about discussions between the Inspector General and the Department of Justice regarding a possible False Claims Act referral concerning Sun overcharges.
So Lurita Doan pushed through a contract in spite of the fact that GSA knew Sun might be named in a suit brought by the Federal government for misrepresenting its commercial prices.
Tim Griffin and Lurita Doan
This is where the USA Purge comes in. As I said, the initial whistleblower Qui Tam case was first filed in September 2004. According to Waxman's communication, GSA also learned about the complaint in 2004, and knew that the IG was discussing a False Claims Act referral with DOJ. GSA's IG intervention may well be the reason DOJ intervened in the whistleblower lawsuit. We know from Waxman's letter that DOJ was considering intervening in summer 2006. And it finally did intervene on December 13, 2006, just two days before Bud Cummins resigned on December 15.
Now, as we heard from the Republicans repeatedly in the Alberto Gonzales hearing the other day, the USA for a particular office is not going to take the lead on such issues. And the Sun case is almost certainly NOT the reason Cummins was dismissed (I still find his investigations into Matt Blunt more disconcerting). Furthermore, the suit against Sun does not and could not relate to the contract signed by Doan (not least because that contract was signed knowing that Sun was overcharging the governmnet). Whatever investigation the GSA's IG pursues into the ongoing Sun contract, it will remain separate from this suit.
Still, Tim Griffin is now overseeing a suit that reflects heavily on accusations leveled against an embattled Bush official. Welcome to the Gonzales DOJ.
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