Government joins whistleblower lawsuit against EMC

The Justice Department has joined a whistleblower lawsuit against information storage giant EMC Corp., alleging the company provided kickbacks to business partners and failed to disclose its commercial pricing practices during contract negotiations with the General Services Administration.

The suit, originally filed in U.S. District Court in Little Rock, Ark., in December 2006 by Norman Rille and Neal Roberts under the False Claims Act, alleged EMC submitted phony claims for information technology hardware and services on numerous government contracts from the late 1990s to the present. The original suit also named contractors Booz Allen Hamilton Inc., Acxiom Corp., and Titan Corp. Justice is not pursuing action against the other contractors named in the 2006 lawsuit.

The 2006 complaint alleged EMC made payments of money and "other things of value" to systems integrators and other partners with whom the company had relationships. The government also accused the company of making false statements to GSA about its commercial pricing practices to charge higher fees on schedule contracts. And it alleged EMC conspired with other firms to disburse cash payments and other kickbacks in return for referrals or recommendations for government contracts.

On Monday, EMC acknowledged the investigation in the legal proceedings section of its 10-K filing posted on the Securities and Exchange Commission's Web site. An EMC spokesman confirmed that Justice's civil division is investigating the company, but denied any wrongdoing.

"EMC did not make improper payments to business partners and did not violate the False Claims Act," said EMC spokesman Patrick Cooley. "The matters at issue in this case are historical in nature; some of the allegations relate to events nearly 10 years old. We will vigorously defend this case and the many years EMC has spent serving the government."

The case is part of a wide-ranging investigation involving multiple lawsuits against technology contractors accused of improper activities. In a separate suit, Rille, a former partner at PricewaterhouseCoopers, and Roberts, a former senior manager at Accenture, also filed civil charges against several technology contractors, including HP, Accenture and Sun Microsystems, accusing them of providing kickbacks to win government contracts.

In April 2007, Justice announced it was joining the lawsuit against Sun, Accenture and HP, indicating that there was some merit to the charges against those three companies. A Justice spokesman confirmed on Tuesday that EMC is being investigated for similar charges.

The EMC lawsuit falls under the qui tam or whistleblower provision of the False Claims Act, which allows a private party, known as a "relator," to file action on behalf of the United States and receive a portion of the settlement. Under the law, the government can recover up to three times the amount of its losses plus civil penalties.

A Justice spokesman said the government can intervene and take over a qui tam suit if an investigation determines there is merit to the case, as was found in the complaint against EMC. In this instance, the investigation was conducted by the U.S. attorney's office in Little Rock, Justice's civil division, GSA's Office of the Inspector General, and other IGs.

Acting Assistant Attorney General Michael F. Hertz said the government intervened in the EMC case "as a part of the Department of Justice's continuing efforts to ensure the integrity of the procurement process."

Separately, Rille and Roberts also have sued Computer Sciences Corp. as well as IBM and PricewaterhouseCoopers, alleging improper contracting practices. Both cases were settled. Neither whistleblower could be reached for comment on Tuesday.