CDW-Government: Shipping, Product Origin and Underreported GSA Sales

CDW-Government agreed to pay $5,663,902 to resolve allegations involving shipping, product origin and underreported GSA sales. The government alleged that the reseller charged government buyers improperly for shipping, sold products from prohibited countries and understated sales to avoid paying a fee owed to GSA. CDW-Government LLC was a wholly owned subsidiary of Illinois-based CDW Corporation, reselling information technology, equipment, services and office supplies. A former sales representative brought the case.

The Justice Department announced the settlement on March 29, 2013. It covered alleged conduct from 1999 through 2011 under a General Services Administration contract.

The government was allegedly overcharged as the customer and shortchanged as the contract administrator. The origin allegation reached what the government was buying in the first place.

Shipping Charges to Government Purchasers

The government alleged that CDW-Government improperly charged government purchasers for shipping. That allegation puts the freight charge alongside the bargain the government actually made: the order, the shipping terms and the invoice for the same purchase.

A GSA Schedule makes commercial supplies and services available at stated prices for stated periods. For a shipping-charge question, we compare the terms governing that order with the charge that appeared on the bill.

The government’s invoice requirements call for identifying the order, the goods or services, quantities, prices and shipping and payment terms. An order number can connect the sale to the shipment and the amount the customer was asked to pay. We examine the invoice alongside acceptance and payment records when assessing a shipping allegation.

Improper delivery charges also appeared in the Fastenal settlement. The government alleged that the distributor charged improperly for delivery and sales tax under a GSA contract, alongside pricing and product-origin allegations. A GSA audit discovered those issues. In CDW-Government’s case, a former sales representative brought the allegations forward. The billing records can matter whether the starting point is an audit or an employee’s knowledge of the sale.

Product Origin and the Trade Agreements Act

The product-origin allegation was that CDW-Government sold the United States goods manufactured in China and other countries prohibited by the Trade Agreements Act. The reseller’s American address did not answer where those products were made.

Product origin follows the manufacturing facts and the contract’s requirements. Under the Trade Agreements clause, origin can depend on substantial transformation: processing that creates a new article with a distinct name, character or use. A supplier’s origin statement, the manufacturing records and the product delivered to the government can therefore tell different stories. We compare them for the same item.

The manufacturer-to-reseller connection is especially clear in the Samsung Electronics America settlement. There, the government alleged that Samsung supplied GSA Schedule resellers with inaccurate origin information, representing products as made in Korea or Mexico when they were made in China. The alleged chain ran from the manufacturer’s information through the reseller’s listing to the agency’s purchase.

That comparison shows why someone at a supplier can hold an important part of an origin case. Manufacturer records, supplier representations, packaging and labels, shipping documents and purchase orders connect the product’s history to what the government bought. Someone who knows where the product was made can explain the gap between the factory and the sales listing.

Underreported GSA Sales and the Industrial Funding Fee

Underreported GSA sales were the third allegation in the CDW-Government settlement. The government said the company understated sales to avoid paying GSA its Industrial Funding Fee, which is based on total contract sales and covers the agency’s costs of contract administration.

The money moves through the contractor. Under GSA’s sales-reporting and fee framework, the fee is included in the selling price, paid by the ordering agency and remitted by the contractor. The reseller’s account of its contract sales therefore affects how much reaches GSA. Reporting fewer sales can leave the agency short even after the government customer has paid its invoice.

A sale can appear in the business’s transaction records while missing from the total reported for the contract. In the alleged CDW mechanism, the reporting shortfall reduced a payment owed to the agency that administered the purchasing arrangement.

We line up what was sold against what was reported and what was paid, under the contract terms in effect at the time. GSA reduced the fee from 1% to 0.75% on January 1, 2004, during the period covered by the CDW allegations.

For a sales or finance employee, that puts the focus on a familiar distinction: what the business sold and what it told GSA it sold. The case alleged that the difference served a purpose, avoiding the fee. Understanding how a sale moved into the report, and who made decisions about that reporting, gives the numbers their meaning.

What Proof Do You Need as a Whistleblower?

We assess the evidence with you, starting with the transaction you know and the records that explain the discrepancy. In a GSA reseller case, that may connect an order to a shipping charge, an origin claim or a reported sales total.

Transparency International’s 2024 report, Transparency, Accountability, and Integrity of Public Procurement Systems, explains that standardized procurement data can be cross-checked against budget and spending records to help detect integrity breaches. The value is in connecting records that describe different parts of the same spending.

Applied to the CDW allegations, that means a shipping charge has an order behind it, an origin representation has a product behind it, and a reported sales total has transactions behind it. A person inside the business may understand the connection that the records leave unexplained. We use that knowledge to assess how the government’s money was affected and which decisions produced the discrepancy.

How Much Money Can a Whistleblower Get From a Qui Tam Lawsuit?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

In the CDW-Government case, the Justice Department announced that the former sales representative would receive an award of $1.59 million from the total recovery. The employee had brought a qui tam case under the False Claims Act. The settlement followed work by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Southern District of Illinois and GSA’s Office of Inspector General.

The case began with someone who knew the selling side of the business. That is a useful starting point for a reseller employee who recognizes the same gap between a government purchase and the company’s account of it.

You Know the Sale Behind the Report

If you know where a shipping charge, product-origin claim or GSA sales report diverged from the transaction, talk with our whistleblower experts about what you saw. We work with you to build your strongest GSA whistleblower case, bring in whistleblower lawyers who understand GSA reseller contracts, and stay beside you as the case moves forward.