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5/27/2010
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EMC Settles Federal Kickback Suit For $87.5 Million

The U.S. government had charged EMC with misrepresenting prices and illegally paying consultants to recommend its products.

EMC has paid the U.S. government $87.5 million to settle a suit over allegedly misrepresenting its prices to the General Services Administration and paying consulting firms kickbacks

The suit, originally filed in the Eastern District of Arkansas in December 2006 but later moved to the U.S. District Court for the Eastern District of Virginia, claimed that EMC violated the False Claims Act by making false representations about its pricing.

The United States also claimed that EMC violated the federal Anti-kickback Act by giving consulting firms a certain percentage of sales to persuade government agencies to give business to the vendor.

Specifically, EMC told the GSA during contract negotiations that it would research to find out the lowest price the vendor was giving its commercial customers, and ensure the GSA got that price for its products and services, according to a press statement by the Department of Justice.

The United States' suit alleged that EMC knew it could not conduct such a price comparison; therefore, its promise to do so and offer the lowest price possible was fraudulent.

The suit also claimed that EMC paid kickbacks to consulting companies to recommend government agencies purchase EMC products, according to the DoJ.

EMC's behavior in this part of the case was identified as part of a larger investigation by the federal government into similar practices by other technology vendors that work with the government. The DoJ joined the lawsuit against EMC in March 2009 as part of this investigation. HP and Sun Microsystems were also investigated.

So far three other companies have settled over kickbacks, and other investigations are pending, according to the DoJ.

The kickback investigation stemmed from a lawsuit filed under what is called the qui tam, or whistleblower, provision of the False Claims Act. Qui tam allows private citizens to sue for fraud on behalf of the United States and share in any recovery.

The Justice Department's Civil Division and the U.S. Attorney for the Eastern District of Virginia handled the case against EMC. The GSA's Office of the Inspector General, the Department of Energy Office of the Inspector General, the U.S. Postal Service Office of the Inspector General, the Defense Criminal Investigative Service, and the Treasury Department's Inspector General for Tax Administration also assisted in the case.

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