Renowned Software Company to Pay $11 million in Penalties Under the False Claims Act

We often report about violations of the False Claims Act as pertaining to healthcare billing fraud. However, fraud against the government can appear pursuant to nearly any contract, and today’s article explores a recent settlement involving software billing fraud. Under the FCA, companies holding contracts paid for by taxpayer dollars are required to submit truthful, detailed invoices of work performed and can face serious penalties for enhanced or “padded” invoices. Additionally, schemes designed to result in double-billing or additional fees are similar prohibited by the FCA. As we explained yesterday, companies caught dealing in this sort of business practice stand to lose their contract or may face a lengthy suspension.

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Details of Case Against CA Technologies

 The defendant in this case is a software company known as CA Technologies and involved multi-jurisdictional government contracts with hundreds of agencies and entities to maintain and service software necessary to run the agency’s purpose. The time span of the allegations ranges from 2001 through 2009 and involves the federal government, California, Florida, Hawaii, Illinois, Massachusetts, New York, Nevada and Virginia.

The whistleblower, former employee Ann Marie Shaw, alleged a fraudulent scheme that was “simple to pull off but hard to detect.” In essence, CA Technologies found ways to double-charge customers for a single service or product transaction.

Double-Billing Scheme

Under CA Technologies contracts, customers who purchased maintenance renewal plans were often eligible for free upgrades and technical support for periods ranging from one to three years, depending on the plan. CA also alerted customers prior to the expiration of a maintenance plan when a new plan payment was due in order to avoid lapses of periods of exposure to risks.

Image from acfcs.com

According to allegations, when customers opted to renew the maintenance plan for another year, CA would immediately charge the customer for the new plan beginning on the renewal date, not the day after the expiration of the current plan. Therefore, for the time period the plans overlapped, customers were unknowingly paying double for their software maintenance.

Blanket Purchase Agreement

Allegations against CA also include misconduct specifically involving the Department of Defense and its contract for prepaid software under a “blanket purchase agreement.” In the complaint, it is alleged that CA encouraged the DOD to forgo purchasing software already in its inventory (and paid for) and convinced the agency to spend additional funds to purchase the same products from third-party vendors.

As Ms. Shaw, the whistleblower, remarked:

“Throughout my career in the software industry, I’ve always treated my customers with integrity and respect….when I was working for CA, I was appalled to learn what CA was doing. I alerted by CA managers to the situation, hoping that CA would stop these practices. My concerns merely fell on deaf ears. What happened at CA deeply disappointed me, but the actions of the Justice Department and the State Attorneys General….have affirmed my trust in justice….”

Be Alert – Fraud can be Anywhere

 As mentioned above, the fraud perpetrated by CA Technologies was “simple to pull off, but difficult to detect.” If you are working somewhere and believe certain practices just don’t seem “right,” you may be correct. Companies engaging in fraud have spent countless hours devising the scheme, and will not openly discuss the policies with anyone other than those who “need to know.” As a result, other employees with inclinations of fraud may be afraid to come forward thinking they are more than likely wrong about what they think they are seeing.If you are aware of fraud, do not hesitate to speak to a whistleblower attorney today. Many of the most lucrative qui tam awards have originated from a plaintiff who, despite fear, was courageous enough to take the first step.