Accenture, Cisco, and Sun still face kickback charges

HP, EMC settled, but others continue to fight in cases alleging widespread contracting fraud

After recent settlements by Hewlett-Packard and EMC in a long-standing government contracting fraud case, three major IT and consulting companies are still embroiled in lawsuits brought by two former insiders.

Lawsuits alleging a widespread kickback scheme among U.S. government IT contractors remain active against Accenture, Cisco Systems and Sun Microsystems, according to court documents and a lawyer for whistleblowers Norman Rille and Neal Roberts. Rille, a former manager for Accenture, and Roberts, a former partner at PricewaterhouseCoopers, filed the lawsuits in 2004 in U.S. District Court for the Eastern District of Arkansas.

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The two whistleblowers alleged that several IT vendors and systems integrators entered into so-called alliance partnerships that provided a formal mechanism for providing kickbacks. The U.S. Department of Justice filed to join the case against HP, Sun and Accenture in April 2007.

Rille and Roberts allege that IT companies paid kickbacks to Accenture and other systems integrators in exchange for preferential treatment on government contracts the systems integrators were working on, or in exchange for strong recommendations to potential government customers.

Systems integrators are supposed to provide objective advice to government agencies, and contracting laws prohibit systems integrators from receiving anything of value for recommending the purchase of a vendor's products, said Ron Packard, a lawyer for Rille and Roberts.

In the HP case, Rille became aware of referral fees and special discounts from HP to Accenture, said Packard, of the Packard, Packard and Johnson law firm in Los Altos, California. "When Mr. Rille left his employment with Accenture, he took with him over 700,000 pages of documents, many of which involve HP," he said.

HP settled the case and another contracting complaint brought by the DOJ by agreeing to pay US$55 million, the agency announced Monday. In May, EMC agreed to pay the U.S. government $87.5 million to settle similar charges.

HP denied any wrongdoing but said it was "in the best interest of our stakeholders to resolve the matter," the company said in a statement.

Computer Sciences agreed to pay $1.4 million to settle the case in May 2008. In August 2007, IBM agreed to pay just under $3 million, and PricewaterhouseCoopers agreed to pay $2.3 million to settle similar complaints.

A Cisco representative declined to comment on the ongoing case.

Accenture believes it did nothing wrong, said spokesman Jim McAvoy. "Accenture is confident its alliance agreements with third-party vendors were appropriate and lawful," he said. "The government knew about alliance relationships in the IT industry, which were widely reported in the industry press. Accenture itself disclosed in proposals the fact that it had alliance agreements with IT vendors."

The company is "defending our position vigorously and expect to prevail," he added.

Representatives of Sun's parent company, Oracle, did not respond to a request for comment on the pending case. But Sun, on Tuesday, filed a response to an amended complaint, with the company denying most of the allegations brought by Rille and Roberts.

While Sun paid so-called influencer fees to systems integrators or resellers, the company "denies that it made any payments to improperly influence a government customer's selection of a Sun product," Sun's lawyers wrote in their Tuesday response.

Sun's lawyers disputed allegations that the company did not disclose its payments to systems integrators and resellers to the U.S. government. "Not only were Sun's reseller and rebate programs well know to the government, but the government actually encouraged Sun to pay its resellers rebates, discounts and other remuneration ... to promote price competition and better pricing to the U.S. government," Sun's lawyers wrote.

Earlier in August, Judge William Wilson Jr. in Arkansas denied Sun's motion to dismiss the case.

Accenture, Cisco and Sun have all had settlement talks in the case, said Packard, the lawyer for Rille and Roberts. "Accenture may very well go to trial, and we have had teams gathering a great deal of evidence for that," he said.

Under the U.S. False Claims Act, whistleblowers can collect a percentage -- usually between 15 and 30 percent -- of the proceeds the U.S. government recovers in lawsuits alleging fraudulent payments of government funds.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantusG. Grant's email address is grant_gross@idg.com.

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