The Office of the Attorney General (OAG) has announced reaching a $4 million settlement with VMware resolving, it said, allegations the software company “violated the state False Claims Act by making false statements and overcharging the state and local governments for information technology software.”
“When companies cheat the government, they cheat hardworking Californians and steal from universities, public schools, healthcare and public safety services,” Attorney General Xavier Becerra said in a statement. “In holding VMware accountable, our taxpayers win to the tune of $4 million.” State and local governments incurred “substantial damages” over a six-year period, which the settlement fully recovers, according to an OAG news release Friday.
In a statement to Techwire Tuesday, a VMware spokesperson said: “VMware cooperated fully with the California Attorney General in connection with their investigation regarding VMware’s state and local government sales practices covering the period between 2006 and 2013. VMware believes that its commercial sales practice disclosures were accurate and denies that it violated the California False Claims Act. The company nevertheless elected to settle this matter with its important customers across California state and local governments.” Among the takeaways:
• Higher education institutions constitute 29 of 34 recipients of portions of the settlement. However, the state of California will receive the most restitution, at nearly $2.8 million. The University of California will receive the third-most restitution, more than $467,000. Other recipients include Coast Community College District in Costa Mesa, at $7,000; American River College in Sacramento, at $3,200; and Air Quality Management, at $2,700, all with rounding. In an email to Techwire, a California Department of Justice (CalDOJ) spokesperson indicated once the matter is final, the department will send checks to entities eligible for recovery; it is currently “in the process of confirming the list of agencies and amounts.”
• Asked what state departments or agencies were VMware customers and might receive restitution, the spokesperson said: “There are dozens of state-level entities that purchased the VMware products at issue,” and indicated CalDOJ is “determining how those purchases were funded to ensure the money is returned to the correct location,” whether to the general fund or to “special state funds.”
• Per the settlement, VMware will pay $4 million — including the Attorney General’s statutory fee of about $1.1 million, and more than $2.9 million restitution — to the Attorney General within 30 days of receiving payment instructions. Within “90 business days of the effective date,” the attorney general will give each “local government customer” a check for their “pro rata share” of the settlement. Parties to the settlement “acknowledge and agree” it “shall not in any way be construed as, a presumption, concession, or admission by any of the parties of any fault, liability, wrongdoing, damages, or any unlawful or wrongful conduct as to any facts or claims that have been or might have been alleged in the action … .” Asked how this impacts VMware’s business with the state of California going forward, the CalDOJ spokesperson said the settlement resolves this issue.
• The situation came to light, per the OAG, via a whistleblower and former VMWare executive who alleged the company “raised prices and submitted inaccurate and incomplete information to the federal government,” the office said, noting state and local governments “often use federal pricing for their contracts.” A whistleblower is listed third among the 34 recipients and is slated to receive $768,000, the second largest amount of restitution.
