Department of Justice Intervenes In False Claims Case Against Symantec

The government has decided to join a false claims case against Symantec in an attempt to recover up to $145 million lost due to Symantec’s allegedly dishonest execution of a contract with the Government Services Agency (“GSA”). The suit was initially brought by Lori Morsell, a Symantec employee in charge of executing GSA contracts. Ms. Morsell also alleges that Symantec defrauded the states of California, New York and Florida. The Justice Department was able to join the case through the “Qui Tam” provision of the False Claims Act (“FCA”).1

The GSA’s contract with Symantec began in January 2007. The government claims that Symantec, a computer security software company, did not offer it the deep discounts that it offered to commercial companies despite the contractual clause obligating Symantec to give its best price to the government at all times. The U.S. alleges that Symantec “knowingly provided the United States with inaccurate and incomplete information” in order to overcharge the government.2

Assistant Attorney General Stuart Delery believes the government’s intervention emphasizes that it only wants to deal with companies that conduct business properly and with integrity. “When the United States spends taxpayer dollars based on contractors’ representations about their business practices, we expect to be given complete and accurate information.”3 Symantec denies that it violated the contract, but, in its annual report, allowed for a $25 million offset to revenue – the low-end estimate of possible loss due to the lawsuit.

Unfortunately for Symantec, software companies have been particularly susceptible to these types of qui tam cases. Since the major cost of creating, manufacturing and distributing software is incurred in the development phase, price discounts are very common. In the case of the GSA contract, Symantec has to make sure to update the government’s prices to be in line with any discounts, despite the fact that the contract originated in 2007. More unfortunately for Symantec, the government rarely joins qui tam FCA cases but when it does, it is successful 95% of the time.4

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