September 23, 2019

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Qui Tam Whistleblower Case Against Axway, Inc. Settles For $6.2 Million

In a qui tam whistleblower case that was brought under the False Claims Act, Axway, Inc. has agreed to pay the United States $6.2 million to settle allegations that it provided the General Services Administration, or GSA, with defective pricing information in order to obtain a Multiple Award Schedule contract (hereby known as MAS) that permitted the company to sell software licenses and other related services to government agencies at inflated prices.

Under the MAS contract, prospective vendors must disclose their commercial pricing policies and practices to GSA in exchange for the opportunity to access the federal marketplace and the hundreds of government buyers housed within. GSA regulations require that, during the preliminary contract negotiations, prospective vendors must make current, accurate, and complete disclosures of the discounts that they offer to commercial customers. GSA relies on the accuracy of these disclosures in order to negotiate fair pricing for their government buyers. After the MAS contract is awarded, regulations require that vendors disclose to GSA any changes in their commercial pricing practices, including new discounts that are offered to commercial customers after the MAS contract is in place.

According to the lawsuit, on October 3, 2001, GSA awarded a MAS contract to Valicert, Inc. for the sale of software licenses and related services. Valicert merged in 2003 with Tumbleweed Communications Corporation, which then merged with Axway, Inc. in 2009. From 2001 to 2011, numerous government agencies purchased products and services from Valicert, Tumbleweed and Axway, all based on the MAS contract pricing given by Valicert in 2001.

The corporate whistleblower who brought this case to the attention of the government is Kenneth Marcus, a former employee of Tumbleweed. In the suit, Marcus alleges that during the initial negotiation of the contract, Valicert knowingly provided GSA with inaccurate pricing information. As a result, the MAS contract that was awarded to Valicert allegedly contained pricing that was less advantageous to the government than what could have been negotiated, had truthful disclosures been made. In addition, it is alleged that Tumbleweed and Axway, Inc. failed to comply with the price reduction clause of the contract. As a result, the government purports that the MAS contract contained inflated pricing, which caused many government agencies to overpay for their purchases.

This settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act. Under this provision, a private citizen (called a relator) can file a suit on behalf of the federal government and obtain a share of any monetary recovery the government is able to make. As his share of the recovery from this settlement, Marcus will receive $1,178,000.

© 2019 by Tycko & Zavareei LLP

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About this Author

Jonathan K. Tycko leads the Whistleblower Practice Group of Tycko & Zavareei LLP

In recent years, the laws of the United States have undergone a whistleblower revolution. Federal and state governments now offer substantial monetary awards to individuals who come forward with information about fraud on government programs, tax fraud, securities fraud, and fraud involving the banking industry. Whistleblowers also now have important legal protections, designed to prevent retaliation and blacklisting.

The law firm of Tycko & Zavareei LLP works on the cutting edge of this whistleblower revolution, taking on even the most complex and confidential whistleblower...

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