VMware Agrees To Pay $75.5M To Settle Illegal Pricing Allegations

June 30, 2015
Tech Crunch

In a significant settlement that could embolden American employees who witness company misconduct, VMware and government contractor Carahsoft Technology Corporation agreed to pay the $75.5 million today to settle illegal pricing allegations.

The Department of Justice accused the companies of violating the Fair Claims Act and overcharging the government, in a case brought in conjunction with a former VMware executive. VMware steadfastly denied any wrong-doing in the case.

The Act states that companies that appear on the General Services Administration pricing schedule agree to offer the rock bottom price to the federal government in exchange for the substantial business that being on the schedule brings a company. That means it can’t offer private client any better price.

The case was one of the top five figures by a technology company under the Fair Claims Act.

The action was filed in 2010 after Dane Smith, the former Vice President of Americas Sales for VMware made company officials aware they were charging the federal government more than they were other large clients. They fired him for his trouble, one of his attorneys, Niall McCarthy from the firm Cotchett, Pitre & McCarthy, LLP told TechCrunch.

According to the complaint filed by Smith’s attorneys, VMware was giving the government a discount as low as 12 percent while offering commercial clients discounts as high as 72 percent (see pages 10 and 11 of the complaint). What’s more, Smith’s attorneys cited emails in which VMware officials openly discussed questions about the ethics and legality of the prices the company was offering the government (see pages 22 to 25 of the complaint)... (To read the entire article, please click HERE)