Hewlett-Packard: Influencer Fees, GSA Pricing and the $55 Million Settlement
Hewlett-Packard’s $55 million settlement resolved allegations of influencer-fee kickbacks and defective General Services Administration pricing. The government alleged that HP paid companies to recommend its products and gave contracting officers incomplete commercial information to negotiate the price. For someone inside technology sales, those are recognizable decisions: who steered the purchase, what the commercial customer actually paid, and what the government was told.
The Justice Department announced the settlement on August 30, 2010. HP’s contract with the General Services Administration covered computer equipment and software for federal agencies. The settlement resolved both the recommendation-fee allegations and the incomplete commercial-sales disclosures behind the pricing claims.
How HP’s Influencer Fees Worked
HP allegedly paid systems integrators to recommend that federal agencies purchase HP products. The government called the payments kickbacks, or “influencer fees.”
That is the purchasing relationship at the center of these government contractor kickback allegations. A systems integrator’s recommendation can help decide whose equipment or software the agency buys. According to the government, HP was paying for that influence.
We call that a kickback with a marketing title. A competing supplier selling on the merits faces an advantage bought outside the product comparison, while taxpayers fund the purchase.
What Is GSA Fraud?
GSA fraud can involve withholding commercial pricing information the agency needs to negotiate federal prices. In HP’s case, the government alleged that incomplete information during negotiations left its 2002 contract defectively priced.
The Justice Department explained that HP had to tell the General Services Administration how it did business in the commercial marketplace so contracting officers could negotiate a fair price for government customers. That makes the actual sales business part of the government bargain: the prices customers received, the discounts behind those prices and the concessions that changed a deal.
The General Services Administration’s traditional Commercial Sales Practices format sought actual discount and concession practices, including departures from written policies. It also required changes to be disclosed before negotiations closed. A published price list could leave those departures invisible. A salesperson or pricing specialist who knows the exceptions may understand why the account given to the government was incomplete.
The historical pricing model also tied later government prices to the deal given to an agreed commercial customer or customer group. That puts the commercial sales desk in the picture alongside the government contracts team: the discounts offered to one buyer could affect what the government was owed.
The Whistleblower Case and HP’s Pricing Disclosure
Two whistleblowers brought the kickback allegations in a qui tam case. HP itself brought the possible pricing noncompliance to General Services Administration contracting officials in 2007.
HP’s disclosure led to an audit by the General Services Administration Office of Inspector General, which concluded that the contract had been defectively priced. The whistleblowers’ allegations concerned payments for recommendations. The company’s disclosure concerned its compliance with its General Services Administration contract. Those distinct paths ended in the same civil settlement.
The Justice Department’s Civil Division and the U.S. Attorney’s Office for the Eastern District of Arkansas jointly handled the civil investigation and settlement, with assistance from the General Services Administration Office of Inspector General, the Office of Inspector General of the Department of Energy, and the Defense Criminal Investigative Service.
The Technology Recommendations Around HP
Similar recommendation-payment allegations reached other technology businesses. The HP announcement identified separate settlements with IBM for $2.9 million, Computer Sciences Corporation for $1.37 million and PwC for $2.3 million.
EMC paid $87.5 million in a separate settlement covering both recommendation payments and pricing allegations. Its pricing theory was particularly concrete: the government alleged that EMC promised comparisons with comparable commercial transactions that it knew it could not perform.
Sun Microsystems was the subject of a separate resolution with Oracle America over alleged recommendation payments and inaccurate commercial disclosures. Accenture‘s settlement concerned the consulting side: allegedly taking vendor kickbacks for recommending hardware and software, alongside inflated-price and bid-rigging allegations.
These cases put both sides of a technology recommendation in view: the company selling the product and the company influencing the purchase.
What the Commercial Customer Knows
Commercial customers can hold the price information that explains a government overcharge. The working paper Whistleblowing Threat and Corporate Disclosure explains that a non-government customer’s price can help show whether the government was overcharged. It also reports that companies disclosed fewer customer identities after states adopted general False Claims Acts. That finding shows why knowing who bought the product can matter alongside knowing what they paid.
For a pricing case, we connect the contract’s customer comparison with commercial invoices, rebates, disclosures and government invoices. Those records test the price the government was charged against the bargain it made. For alleged recommendation fees, we examine what the payment bought and how it connected to the agency’s purchase.
A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.
You Saw How the Purchase Was Won
If you know which concessions stayed out of a GSA disclosure or what an integrator received for a recommendation, speak with our whistleblower experts about the transaction you saw. We build the case with you and bring in government procurement fraud whistleblower lawyers who understand commercial pricing and technology recommendation fees. From the first conversation through the pursuit of a recovery, we stay on your side of the table.
