In a move that could have ramifications for government procurement in Australia, IT consulting giant Accenture and computer-makers Hewlett Packard and Sun Microsystems face charges of operating illegal kickback schemes on billion dollar US Government contracts, according to a US Department of Justice (DOJ) complaint filed in an Arkansas federal court.

Accenture, Hewlett Packard and Sun have denied the allegations and said they would defend themselves against the complaints. Accenture has contracts worth more than $500 million with the Australian Government, but the story has not been reported by any of the main IT media in Australia.

The involvement of the Department of Justice is significant, as that body generally joins proceedings only where evidence is strong. Its success rate is 98%, according to a source cited by Business Week.

Proceedings were started by former Accenture staffer Norman Rille and former Deloitte & Touche partner Neal Roberts in 2004, under a US law that would give them a third of damages awarded. The DoJ then joined the proceedings in April 2007, filing its own 80-page complaint.

The DoJ complaint points out that HP and Accenture had been alerted to the need to disclose their kickback arrangements on a Defence Logistics Agency contract, but failed to do so. If the DoJ’s complaint is proven, Accenture, HP and Sun will be liable for up to three times the amounts they wrongfully obtained from their government contracts.

The DoJ complaint accuses Sun and HP of paying millions of dollars annually either in cash or rebates to companies that sold their products to the Government, and it accuses Accenture of accepting those kickbacks. Many other firms are named in the complaint, including Bearing Point, Capgemini Ernst & Young and Electronic Data Systems, but not accused of wrongdoing.

The complaint also alleges Sun failed to honour a clause that requires it to charge the Government no more than it charges commercial customers, in General Services Administration contracts between 1997 and 2004 valued at $200 million.

Detailed stories in Business Week and Information Week list numerous examples of the kickback arrangements. For example, from 2001 to 2004, Sun paid influencer fees totalling $281,000 to Pricewaterhouse Coopers Technology Integration, Accenture, and World Wide Technology from 2001 to 2004. Pricewaterhouse Coopers Technology Integration and World Wide are not accused of any wrongdoing.

Sun also paid rebates up to 10% to some companies that replaced competitors’ products with those from Sun.

Accenture received more than $20 million in payments from alliance partners between 2000 and 2006, the DoJ alleged. It also received rebates and marketing assistance based on the amounts of equipment sold to the Government, but failed to pass those rebates on to the Government, as required by US federal law.

Peter Fray

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