Governments Recover $11 Million in Fraud Settlement

Ten governments will receive an $11 million windfall following the settlement of allegations that CA Technologies engaged in fraudulent software maintenance renewal practices from 2001-2009.

CA Technologies — formerly known as Computer Associates and CA Inc. — will send $8 million to the federal government and split the remaining $3 million among the governments of California, Florida, Hawaii, Illinois, Massachusetts, New York, Nevada, Virginia and the District of Columbia. The payout caps off a whistleblower lawsuit filed in 2006 by former CA Technologies employee Ann Marie Shaw.

The software company allegedly violated the federal False Claims Act and similar state and local laws preventing businesses from knowingly overcharging government entities. The lawsuit claimed that instead of starting software maintenance renewal plans at the end of current contracts, CA Technologies set the renewal period to begin on the day it processed renewal orders, leading to double payment for services during the period between ordering a renewal and the actual end of a contract.

Settlement Payments: Federal government — $8 million California — $983,807 New York — $708,795 Illinois — $426,641 Florida — $327,416 Virginia — $227,583 Massachusetts — $204,639 Nevada — $73,794 District of Columbia — $35,346 Hawaii — $25,734 Ann Marie Shaw — approximately $2 million Source: Phillips & Cohen LLP

The False Claims Act is a statute that was created during the Civil War to protect the federal government from fraudulent claims. Since 1986 the penalty for violating the statute was increased from double to potentially three times the government’s losses for the fraudulent billing. Many states have similar laws in place.

In addition, the settlement covers potential fraud stemming from a contract CA Technologies had with the U.S. Department of Defense for prepaid software under a “blanket purchase agreement.” The lawsuit alleged that CA Technologies was purposefully steering DoD employees away from ordering software the department already paid for in favor of buying the same products through third-party vendors.

Under the qui tam reward provisions in the federal and state False Claim acts and the terms of the settlement, Shaw will receive approximately $2 million for helping expose the alleged fraud.

In an interview with Government Technology, Jennifer Hallahan, corporate spokesperson for CA Technologies, said the company has corrected systems shortcomings that were discovered in the course of the 7-year-old case. She added that the public-sector agencies remain valued customers.

An email sent to the California Department of Technology for comment on how the settlement may impact its relationship with CA Technologies was not immediately returned.

Peter Chatfield, a partner with Phillips & Cohen LLP, the firm that worked in tandem with Vogel, Slade & Goldstein LLP to represent Shaw, said the type of activity CA Technologies was allegedly engaged in is something both public agencies and regular citizens should be actively looking for. He added that even if an agency uses something as basic as an Excel spreadsheet to record information, someone should be tasked with keeping tabs on the expiration dates of contracts to avoid double payments.

“Keep track of when they were renewed and when they are up for renewal again,” Chatfield said. “Double check those kinds of maintenance agreements to make sure you’re getting the full benefit of the extra time you’re paying for, instead of having any kind of overlap.”