Cisco, Westcon to Pay $48 Million for Defrauding Government

Based on a lawsuit filed in 2005 by the False Claims Act law firm of Packard, Packard & JohnsonNorman Rille and Neal Roberts, nnetworking equipment giant Cisco Systems and its distributor, Westcon Group, have agreed to pay the United States government $48 million to resolve allegations that it defrauded various federal government agencies. in Little Rock, Arkansas, on behalf of whistleblowers

The two whistleblowers, Rille and Roberts, first approached their attorneys in 2002, and they jointly worked on the case for two years before filing the lawsuit under seal in federal court in Little Rock, Arkansas.

According to a report on Bloomberg (News - Alert) Businessweek site, the Justice Department previously settled claims made by the same men over allegations against Hewlett-Packard Co., EMC Corp., IBM Corp., Computer Sciences (News - Alert) Corp. and PricewaterhouseCoopers LLP.

In a statement to Bloomberg Businessweek, Cisco spokeswoman Kristin Carvell said, “The settlement covers a small fraction of sales to the General Services Administration from 1997 through 2009 and does not impact any current government business.”  Carvell added, “Westcon continues to have an active contract with the GSA (News - Alert), and Westcon and many other distributors continue to sell a broad range of Cisco equipment to the federal government.”

Likewise, a Westcon spokesman said in an emailed statement to Bloomberg Businessweek, “It is important to note this does not in any way affect our current government business -- as Westcon maintains an active GSA contract -- nor does it affect our strong relationship with Cisco.”

With headquarters in Tarrytown, NY, Westcon Group (News - Alert) is owned by Datatec Ltd. of Johannesburg. Founded in 1985 as an IT sales company in New York, Westcon’s revenue exceeds $3 billion.

While relator Rille had worked for Accenture, a Systems Integrator for the Government, Roberts had worked with PricewaterhouseCoopers (News - Alert), another Systems Integrator, for years. Both the whistleblowers knew about alliance practices and the requirements of disclosure to the Government regarding discounts.

After the lawsuit was filed, the two relators and their attorneys assisted the government over a period of years in the investigation of the allegations and the damages.