Storage Soup

May 25 2010   7:48PM GMT

EMC pays up to settle Justice Dept. lawsuit

Dave Raffo Dave Raffo Profile: Dave Raffo

The Justice Dept. today said EMC paid $87.5 million to settle a lawsuit that charged the vendor with false pricing claims and taking part in a kickback scheme with consulting firms who do business with government agencies.

The Justice Dept. claims EMC committed fraud by inducing the General Services Administration (GSA) to enter a contract with prices that were higher than they should have been. The GSA purchases products for the federal government. The Justice Dept. said EMC claimed during contract negotiations that for each government order under the contract, the vendor would conduct a price comparison to ensure that the government received the lowest price provided to any of its commercial customers – claims EMC could not live up to because it could not make such price comparisons.

Under the kickback scheme detailed in the Justice Dept. press release, EMC paid consulting companies fees whenever the consultants recommended that a government agency buy EMC products. EMC is not alone here – the DOJ said it has settled with three other technology companies and other investigations are pending. It did not name the other vendors.

“Misrepresentations during contract negotiations and the payment of kickbacks or illegal inducements undermine the integrity of the government procurement process,” Tony West, assistant Attorney General for the Civil Division of the Department of Justice, said in the Justice Dept. release. “The Justice Department is acting to ensure that government purchasers of commercial products can be assured that they are getting the prices they are entitled to.”

EMC denied any wrongdoing when the charges were first made public in March of 2009, and an EMC spokesman today emailed a statement to StorageSoup saying the vendor “has always denied these allegations and will continue to deny any liability arising from the allegations made in this case. We’re pleased that the expense, distraction and uncertainty of continued litigation are behind us.”

The EMC spokesman said some of the charges are almost 10 years old.

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