EMC: Promised Price Comparisons and Technology Recommendation Fees

EMC paid $87.5 million to settle allegations involving promised price comparisons and technology recommendation fees. The government alleged that the information technology company promised to check every government order against comparable commercial purchases, knew it could not do that, and later said it was doing it anyway. Separately, it allegedly paid consulting companies to recommend its products to federal agencies. An insider could recognize the problem from either side of the sale: the commercial pricing file or the agreement that paid for the recommendation.

The Justice Department announced the payment on May 25, 2010, resolving allegations under the False Claims Act and the federal Anti-Kickback Act. EMC Corporation was based in Hopkinton, Massachusetts. The alleged deception put taxpayers on the hook for higher contract prices.

The Price Comparison EMC Promised for Every Order

EMC allegedly promised the General Services Administration that each government order would receive a comparison with commercial sales. The purpose was specific: the government would get the lowest price EMC provided to any commercial customer making a comparable purchase.

That promise put actual purchases at the center of the bargain. The relevant comparison was between the government’s order and commercial customers buying on comparable terms. Someone responsible for commercial sales records would recognize the difference between publishing a price list and being able to make that comparison for every order.

According to the government’s complaint, as described in the Justice Department’s announcement, EMC knew during negotiations that it could not perform the comparisons. The government alleged that those representations induced the agency to enter a contract at higher prices than it otherwise would have accepted.

The allegation then followed the contract into performance. EMC allegedly continued representing to the government that it was conducting the comparisons. The promise helped obtain the contract, and the later assurances told the buyer that the promised safeguard was working.

For a pricing employee, the important connection is between what the company promised, what its process could actually do, and what it later told the customer. A dated commercial sale can show a price. The contract and communications explain why that sale mattered to the government order.

Commercial Sales Practices Went Beyond the Price List

Commercial sales information gave the General Services Administration a basis for negotiating government prices. The traditional Commercial Sales Practices format sought actual discounts and concessions, including departures from written policies. The industry’s pricing-disclosure requirements therefore reached beyond the published price list to the terms on which the vendor actually did business.

The separate Hewlett-Packard settlement shows why those commercial records mattered in federal technology purchasing. HP sold computer equipment and software through a General Services Administration contract. The Justice Department explained that HP had to disclose how it conducted business in the commercial marketplace so the agency could negotiate a fair price for government customers.

The government alleged that HP supplied incomplete commercial information during negotiations. After HP disclosed possible contract noncompliance to the agency, an inspector general audit concluded that the contract had been defectively priced. In EMC’s case, the alleged defect was the transaction-specific comparison promise and the company’s ability to honor it. Both accounts show the federal buyer depending on information held by the seller.

The General Services Administration inspector general made the economic point in the EMC announcement: companies should not keep charging the government higher prices when costs go down. EMC’s alleged promise made the comparison specific to each order. The question was what a commercial customer paid for a comparable purchase, not simply what appeared on a published price list.

Technology Recommendation Fees Paid for the Recommendation

EMC also allegedly maintained agreements that paid consulting companies each time they recommended an EMC product to a government agency. The Justice Department described this as an illegal kickback scheme designed to influence the government’s purchasing decisions.

The alleged payment rewarded the recommendation itself. A consultant’s recommendation could look like advice about which technology to buy while also earning the consultant a fee from the vendor whose product it recommended. The financial incentive sat inside the advice reaching the agency.

This part of the case concerns the choice of product. The price-comparison allegation concerns the price attached to the purchase. Together, they describe influence at two different points in the same buying process: why an agency selected the product and what it was led to believe about the price.

A separate case against Accenture approached technology recommendations from the consulting side. The government alleged vendor kickbacks for recommending hardware and software, alongside other federal contracting misconduct. The comparison helps explain why the commercial relationship behind a recommendation matters as much as the recommendation an agency receives.

For someone who worked with consulting agreements, the connection worth examining is the agreement, the recommendation and the payment it earned. We look at those together to understand whose product was being promoted and who was being paid to promote it.

A Whistleblower Case and an Audit Reached Different Parts of the Sale

A qui tam whistleblower lawsuit initiated the kickback investigation described in the EMC announcement. The allegations were part of a larger investigation into government technology vendors that had already produced settlements with three other companies.

The commercial pricing allegations had an audit connection too. In its later announcement about HP, the Justice Department expressly said that EMC’s settlement also resolved defective-pricing claims found through a General Services Administration inspector general audit. The whistleblower case and the audit reached different parts of the transaction: recommendation payments and government pricing.

A person familiar with the recommendation channel and a person familiar with the sales data could have very different views of the same vendor’s federal business. Our work with an insider starts with the part they know and connects it to the purchasing decision or government price it affected.

Why the Person Who Knows the Records Matters

Transparency International’s 2024 paper, Transparency, Accountability, and Integrity of Public Procurement Systems, explains that the value of access to procurement data depends on people able and willing to use it. Its review reports that detailed tender information helps bidders judge the competition and fairness of a purchase.

Commercial sales records can show whether the promised comparison was possible. A consulting agreement can explain why a recommendation generated a payment. Someone who worked with those records can explain the relationship between them.

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 a technology government procurement case, the starting point for our work is what you know about the commercial promise, the recommendation or the money behind it. Our whistleblower experts build the case around what those records show and what you know from working with them.

The Pricing File or the Fee Agreement

If you saw a commercial-price comparison that could not be performed or a fee tied to a government technology recommendation, speak to our whistleblower experts about what happened inside the business. We work beside you to build your strongest case, bring in government procurement fraud whistleblower lawyers who understand pricing disclosures and vendor incentives, and stay with you through the pursuit of a recovery.