VMware, Carahsoft Settle GSA Whistleblower Lawsuit for $75 Million

Virtualization kingpin VMware (VMW) and Carahsoft, a Reston, VA-based government IT solutions provider, will pay $75.5 million to the General Services Administration (GSA) to settle a lawsuit in which the government claimed it had been victimized by fraudulent pricing.

The GSA alleged in the lawsuit, which originally was filed in 2010, that the government paid more for the same VMware products and Carahsoft services than did private companies. The action was filed by Dane Smith, former VMware Americas Sales vice president.

VMware and Carahsoft defrauded the government agency with with “inaccurate pricing, inaccurate disclosures, and incomplete information about sales of VMware products to non-governmental customers,” prosecuting law firm Cotchett, Pitre & McCarthy said. “As a result, the lawsuit alleged that the government paid higher prices on VMware products and services than comparable private customers.”

The government charged that VMware and Carahsoft provided the GSA with a 12 percent discount, less than the discount it offered to foreign governments and far from the favorable pricing offered to private companies.

Cotchett, Pitre & McCarthy called the settlement “one of the five largest recoveries” from an IT company in the history of the False Claims Act.

“Technology companies overcharging the government has become a growth industry,” said Niall McCarthy, lead attorney in the case. “Whistleblowers like Dane Smith are vital to protecting taxpayers,” he said.

VMware issued a statement in which it denied culpability and said it settled to avoid a long litigation with the federal government, which it described as an “important customer.”

“VMware cooperated fully with the DOJ and GSA in connection with their multi-year investigation regarding VMware’s government sales practices covering the period between 2007 and 2013,” the vendor said. “VMware believes that its commercial sales practice disclosures to the GSA were accurate and denies that it violated the False Claims Act. The Company nevertheless elected to settle this lawsuit rather than engage in protracted litigation with one of its important customers–the federal government.”