Software giant CA Technologies will pay $11 million to settle whistleblower allegations that it violated the federal False Claims Act and similar state and local statutes through the fraudulent billing of hundreds of public agencies on software maintenance renewal contracts from 2001 through 2009.
Out of the $11 million, the federal government will receive $8 million and the remainder will be divided among the District of Columbia and eight states: California, Florida, Hawaii, Illinois, Massachusetts, New York, Nevada and Virginia.
The allegations settled were first asserted by former CA Technologies employee Ann Marie Shaw in a whistleblower qui tam lawsuit filed on July 18, 2006, in the US District Court for the Eastern District of New York.
Shaw was represented by Phillips & Cohen and Vogel, Slade & Goldstein.
“The fraud CA Technologies allegedly committed was simple to pull off but hard to detect,” said Peter W. Chatfield, a Washington, DC, attorney with Phillips & Cohen. “Essentially, we allege CA Technologies found ways to charge customers twice for the same services and products.”
CA Technologies, formerly known as Computer Associates and CA Inc., defrauded its government customers in two ways, according to Shaw’s lawsuit.
Customers who purchased maintenance renewal plans for its software licenses were entitled to free upgrades, patches for errors and web-based technical support for terms of one to three years. Prior to the expiration of a maintenance plan, the company would alert customers to renew their plans and avoid lapses in these services.
However, when a customer did renew, the lawsuit alleged, instead of starting the renewal date at the end of the current plan, CA Technologies set the renewal period to begin on the day it processed the renewal order. In effect, it was alleged, customers paid twice for maintenance services in the period between ordering a renewal and the actual end of the current plan for which they already had paid.
The second fraud covered in the settlement involved a contract CA Technologies had with the Department of Defense for prepaid software under a “blanket purchase agreement.” The qui tam lawsuit alleged that the company steered Defense Department customers away from ordering software from inventory the department already had paid for and convinced them unwittingly to spend more money to buy the same products through third-party vendors.
Shaw worked for CA Technologies from 2003-2006 as a technical sales specialist with responsibilities for sales of software to the federal government.
“Throughout my career in the software industry, I’ve always treated my customers with integrity and respect,” said Ms. Shaw. “When I was working for CA, I was appalled to learn what CA was doing. I alerted my 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, along with my dedicated legal team who stood by me every step of the way, have affirmed my trust in justice and the law. I’m glad that CA’s government clients that were wronged will be compensated and I hope that current and future customers will be treated fairly.”
Under the qui tam reward provisions of the federal and state False Claims Acts and the terms of the settlement with CA Technologies, Shaw will receive approximately $2 million.
“This is a case where a single person – Ms. Shaw – stepped forward to blow the whistle on what she believed was a fraud that was costing public agencies across the nation – ranging from local libraries to the Defense Department – millions of dollars, and likely would have continued for many more years if not for her courage,” said Janet Goldstein of Vogel Slade & Goldstein.