Justice Dept. Sues CA for False Claims on Government Contract -- 3rd Update

By Dow Jones Business News, 

By Maria Armental

New York software vendor CA Inc. is being sued by the U.S. Justice Department for allegedly overcharging the government for software licenses and maintenance.

The Justice Department alleges CA, formerly known as Computer Associates International Inc., gave government contracting officers incomplete and inaccurate information during contract extension negotiations, including failing to disclose higher discounts it was offering to commercial customers. The federal complaint also alleges CA failed since 2002 to pass on those discounts to the government or erred on calculations, resulting in the government's overpaying.

Under the terms of the contract, the Justice Department said CA was required to monitor those discounts and apply them to the government's contract.

The company challenged the allegations in a statement saying, "We believe that the material aspects of the government's liability theories are unfounded and will vigorously contest them."

Negotiations are ongoing, a company spokeswoman said.

Based in Islandia, N.Y., CA makes software for mainframe computers and other hardware.

Among the federal agencies that are part of the contract are the Department of Defense, the Energy Department, the Department of Health and Human Services and the Department of Labor.

"Too many federal contractors think they can get away with overcharging the government," Ronald C. Machen Jr., U.S. attorney for the District of Columbia, said Thursday in a statement.

"The government has the right to get the same kind of pricing concessions that other large customers get, and not to be treated like a gravy train," said lawyer Rob Vogel, who represents Dani Shemesh, a former employee of CA Israel Ltd., a subsidiary in Israel.

Mr. Shemesh filed the original suit in 2009 under the whistleblower provisions of the False Claims Act, which allow private parties to sue on behalf of the government and to share in any recovery. The civil suit was made public Thursday.

Most of the government's allegations were filed in Mr. Shemesh's suit, Mr. Vogel said, noting the only discrepancy arises from the timeline in which some of the alleged violations occurred. Mr. Shemesh left the company in 2009, before the suit was filed, amid a dispute.

The government, which had previously notified the court it intended to join in the lawsuit, will litigate the case.

Write to Maria Armental at maria.armental@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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This article appears in: Technology

Referenced Stocks: CA

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