Update: IBM, PWC settle U.S. contracting lawsuit

IBM  and PriceWaterhouseCoopers (PWC) have separately agreed to pay the U.S. government a total of $5.3 million to settle allegations that the companies solicited and provided improper payments on technology contracts with government agencies, the U.S. Department of Justice announced Thursday.

IBM has agreed to pay a little less than $3 million and PWC will pay $2.3 million to settle the complaints, the DOJ said in a news release. The allegations of improper contracting practices came from a group of whistleblower lawsuits targeting several tech vendors and systems integrators filed in U.S. District Court for the Eastern District of Arkansas in September 2004.

The lawsuits, filed by men who worked at Accenture  and PWC, alleged a multimillion-dollar kickback scheme involving work on numerous U.S. government contracts. Other companies named in the lawsuits include Accenture, Hewlett-Packard, and Sun Microsystems.

IBM and PWC knowingly requested or made kickback payments under programs called “alliance benefits,” shared between systems integrators and tech vendors, said the DOJ, which joined the lawsuits in April.

Both PWC and IBM denied the allegations. “IBM did not engage in any kickbacks, false claims, or any other illegal conduct in any of the claims that have been filed in this matter,” said IBM spokesman Fred McNeese. “We’re not going to discuss the reasons for the settlement.”

PWC, in a statement, said the settlement covers the action of its consulting business, sold in October 2002 to IBM. “PWC has cooperated fully with the federal government officials conducting this investigation,” said the statement from spokesman David Nestor. “PWC believes that the allegations of the complaint characterizing conduct as ‘kickbacks’ are completely without merit as to the firm but chose to settle the case, without any admission of wrongdoing, in order to avoid the expense, distraction, and uncertainty of litigation.”

The lawsuits allege that several other prominent tech vendors received kickbacks disguised as alliance benefits. Accenture and HP in April denied wrongdoing. Sun said it was cooperating with a government investigation. Sun is “proud of what we have achieved for the American taxpayer,” the company said last month.

Court documents allege a cozy relationship between systems integrators, hired by government agencies to oversee large tech projects, and tech vendors. The lawsuits accuse the companies of exchanging millions of dollars in illegal rebates and other payments since the late 1990s.

The companies also failed to disclose their conflict-of-interest relationships, the DOJ said Thursday.

“The payment of kickbacks or illegal inducements undermines the government procurement process,” Peter Keisler, assistant attorney general for the DOJ’s Civil Division, said in a statement. “The Justice Department is acting in these cases and in the overall investigation to protect the integrity of the procurement process for technology products and services.”

The DOJ investigation into other contracts continues, the agency said.

The lawsuits were filed by Norman Rille, who had worked as a senior manager in Accenture’s information delivery architecture group, and Neal Roberts, who investigated the relationship between systems integrators and IT vendors while a partner at PWC.

(Ben Ames in Boston contributed to this report.)

This story was updated Aug. 16, 2007.