IBM, PwC Settle Kickback Allegations

IBM and PriceWaterhouseCoopers agreed to pay about $5.29 million to settle charges of kickbacks for technology contracts with government agencies, the U.S. Department of Justice said on Thursday.

International Business Machines Corp. has agreed to pay about $2.97 million, while auditing firm PwC will pay about $2.32 million, the DoJ said in a statement.

The complaints were filed by Norman Rille and Neal Robert under the whistleblower provisions of the False Claims Act

PwC said the allegations were related to work performed by its former consulting business, since sold in October 2002. IBM could not immediately be reached for comment.

The DoJ said the actions were part of a larger ongoing investigation of government technology vendors and consultants that has already resulted in complaints being filed in Arkansas against Accenture Ltd., Hewlett-Packard Co. and Sun Microsystems Inc.”

Can’t say I am surprised. And PwC should do an examination of conscience. They have or have had alliances with all of the above mentioned firms in the past. And they are not very good at making sure that there are no conflicts or perceived conflicts before they get into new ones.

The DoJ complaints accuse Accenture and other systems integrators of collecting money from IT vendors in exchange for preferential treatment on government contracts they were working on, or in exchange for strong recommendations to potential government customers. The defendants did not report these kickbacks to the U.S. government, the DoJ alleges.

The defendants “have exploited the trust the government has reposed in them to act with honesty and candor … to act without conflicts of interest; and to serve as independent third party objective advisors,” the DoJ wrote in its complaint against Accenture. “The defendants’ focus on profits and Alliance Partner revenue, rather than the interest of their government clients, has destroyed their independence and eliminated fair competition in the government procurement process.

The DoJ complaints detail payments made to Accenture from more than two dozen companies, including HP, Sun, IBM, Oracle, EMC, CA, SAP America and CDW.

In addition to Accenture, HP allegedly made payments to BearingPoint, Capgemini, Electronic Data Systems, Science Applications International and other companies, while Sun allegedly made payments to Accenture, PricewaterhouseCoopers Technology Integration, World Wide Technology, Northrop Grumman and other companies, the DoJ complaints said.”

And this is not the first case PwC has had to settle like this, with the same whistleblower, a retired PwC partner filing the claim in both cases.

PricewaterhouseCoopers allegedly defrauded Peace Corps

PricewaterhouseCoopers Pays $42 Million to End Overbilling Suit

PwC allegedly defrauded the Department of Defense, the Justice Department, the Environmental Protection Agency, the Securities and Exchange Commission, the Peace Corps, the Department of Education and the Department of Veterans Affairs.

Accounting firm PricewaterhouseCoopers LLP has paid $41.9 million to resolve a California federal court suit accusing it of overbilling the government for travel expenses.
PwC agreed to the settlement without admitting any wrongdoing. The suit, which was filed in the U.S. District Court for the Central District of California, alleged PwC did not inform the United States that it had received rebates on its travel expenses from credit card and travel companies, airlines, hotels, and rental car agencies.

Plaintiff Neal Roberts, a former partner at the accounting firm, claimed in his False Claims Act suit that even though PwC received the rebates, it knowingly billed the full amount of its travel expenses to the federal government…The United States, which chose to participate in Roberts’ suit, alleged that by overbilling for the travel expenses, PwC violated the terms of its many federal contracts over a period running from 1990 to 2003. The contracts were for auditing and consulting services, according to a statement by Debra W. Yang, U.S. attorney for the Central District of California.

PwC allegedly defrauded the Department of Defense, the Justice Department, the Environmental Protection Agency, the Securities and Exchange Commission, the Peace Corps, the Department of Education and the Department of Veterans Affairs. The suit also alleged that management at PwC had been made aware of the overbilling through internal complaints by several partners but made no effort to refund the monies to the United States. Roberts will receive a share of the settlement sum, although the exact amount has not yet been determined, Yang said.”

An article about how the investigation started.

2 replies

Trackbacks & Pingbacks

  1. […] Middlemen, subcontractors and alliance partners, they’re a funny thing. They can be a great boon to growing your business and they can also be a huge vulnerability. We’ve mentioned before the connection between PwC and Cisco. PwC is Cisco’s external auditor and has placed many a financial executive there from its alumni. […]

  2. […] one of their own Vice Chairman over insider trading. The firms have had issues with alliances and PwC got caught taking kickbacks from alliance partners for government work. They do strange and mysterious work […]

Comments are closed.