Informatica: Pricing Information That Allegedly Caused Resellers’ Claims

Informatica agreed to pay $21,570,000 to resolve allegations over pricing information that caused resellers’ claims for inflated government payments, along with alleged country-of-origin violations. The government alleged that false commercial discount information traveled from the software company through its resellers into General Services Administration contract negotiations. For someone inside software sales, the important record may sit well before the government invoice: the discount history passed to the reseller that negotiated the price.

Informatica LLC, formerly Informatica Corporation, sold tools for establishing and maintaining data warehouses. The software development company was headquartered in Redwood City, California. The Justice Department announced the settlement on May 13, 2019, following a False Claims Act lawsuit brought by a former Informatica employee.

How Informatica’s Pricing Information Reached the General Services Administration

The government alleged that Informatica knowingly gave resellers false information about commercial discounts on its products and services. The resellers then used that information in negotiations for government-wide Multiple Award Schedule contracts.

Under the contracts described in the Justice Department’s announcement, the General Services Administration used commercial pricing disclosures to negotiate the maximum prices a vendor could charge government agencies. The government alleged that Informatica’s disclosures led the General Services Administration to accept less favorable pricing and ultimately caused government purchasers to pay too much.

That puts the alleged overcharge upstream of the invoice. In the government’s account of Informatica, the manufacturer’s description of its commercial business helped set the price the public buyer would later pay. The question reaches back to what the manufacturer told the reseller, and whether that account matched its actual discount practices.

For a pricing or channel-sales employee, that distinction matters. Knowledge of the commercial side can explain something the government purchase alone cannot: what the negotiator should have been told about the seller’s discounts. We see the absurdity: the buyer relied on the seller’s discount history to get a fair price, and allegedly got false information instead.

Why a Reseller Could Need the Manufacturer’s Discount History

Traditional General Services Administration Schedule negotiations could require a reseller to supply its manufacturer’s commercial sales information. A reseller without significant commercial sales of its own could need that information under the conditions in GSA’s Commercial Sales Practices format.

The format sought actual discounts and concessions, including departures from written policies. A published price list tells the buyer one thing. The terms customers actually received can tell it another. Commercial invoices, rebates and other concessions can explain what the published list leaves out.

The discount history had to be accurate and complete as of the required date, and changes disclosed before negotiations closed. We compare the history available when a disclosure was prepared with the version sent to the reseller and the information used in the negotiation. That is how the account given to the General Services Administration can be tested against the business behind it.

The General Services Administration’s traditional Schedule pricing framework sought most-favored-customer pricing, while allowing another fair and reasonable price where warranted. The negotiation also identified the customer used to track the agreed pricing relationship, often called the basis-of-award customer.

The Same Information Path in Other Software Cases

VMware and Carahsoft resolved a similar pricing allegation in 2015. VMware was the software vendor, and Carahsoft was the Schedule reseller. The government alleged that concealed commercial pricing practices and false statements concerning VMware products and services sold through Carahsoft’s contract caused overcharges. The commercial practices belonged to the software business. The government contract sat with the reseller.

In the Cisco Systems and Westcon Group North America settlement, announced in 2010, the government alleged that incomplete information supplied during negotiation of Westcon’s GSA contract produced defective pricing for Cisco products and false government claims. These cases show why a manufacturer’s commercial records can matter to a government contract negotiated by another company.

The Settlement Also Covered Country of Origin

The Informatica settlement also resolved allegations that the company caused sales to the United States that violated the Trade Agreements Act. The Justice Department described that law as restricting the country of origin of goods the government purchases. The settlement covered both the pricing and origin allegations.

The origin question follows a different part of the transaction. Discount records explain the commercial pricing information. Manufacturer records, supplier representations and purchase orders can connect the goods to the origin represented for the government sale. We examine the origin representation alongside the contract governing delivery and the records describing the product.

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 Informatica case, the Justice Department announced that the former employee who brought the lawsuit would receive $4.3 million from the settlement.

The Justice Department’s Civil Division and the United States Attorney’s Office for the District of Columbia handled the case, with assistance from the General Services Administration’s Office of Inspector General.

What Proof Do You Need as a Whistleblower?

For pricing information supplied through resellers, the proof connects actual commercial transactions to the disclosure, the contract and the government’s purchase. We work with you to understand those connections, including which pricing promise governed the sale and how a contract change affected it.

A sales employee may understand a rebate that looks unremarkable in an accounting record. A reseller employee may know where the manufacturer’s information entered the negotiation. That knowledge helps us explain what an invoice or disclosure means in the business, and how the account given to the government differed from actual commercial practices. Our work with you brings the records and the sales operation together.

You Know the Discounts Behind the Disclosure

If you worked with commercial discounts or the information sent to government resellers, speak to our whistleblower experts about where the disclosure departed from the business you knew. We build the case with you and bring in government procurement fraud whistleblower lawyers who understand software pricing and reseller contracts. We stay beside you through the case, keeping your knowledge of the sales operation at its center.