DOJ Names Dozens of IT Vendors in Kickback Scheme

grantus writes "Today, the U.S. Department of Justice joined three whistleblower lawsuits against Hewlett-Packard, Sun Microsystems and Accenture alleging a massive kickback scheme on government contracts. Among the IT vendors listed in the lawsuit as Accenture partners are Microsoft, Cisco, IBM, Dell and Oracle."

Comments

Re:A show of hands if you are surprised

[jeevesbond]

As someone else pointed out the corruption is not in the US government but with the companies supplying IT services to them. Practically every large company in IT seems to be involved, from Microsoft to HP, IBM and Sun. Which is annoying for those of us who love a good Microsoft bash, it seems they are not the worst offenders in this case.

As I read it the /. economic model for these scams goes something like this:

1. Company A has a contract to provide US government with an IT solution
2. Company A looks to Company B to provide part of that solution (some specific software product or service)
3. Company B gives Company A a discount for purchasing their services
4. Company A charges US government full amount that would be charged by Company B without the discount
5. ???
6. Profit!

There seem to be other variations on the theme, such as giving share options instead of discounts. Either way the US government have been overcharged it seems. Hope I'm right about this as it's a complex issue and the article is a little vague on the details, that's why I thought this summary would be useful. :)

Can someone explain this to a non-business grad?

[Sandcastle]

Sure sounds bad when you first read it, but I'm not sure exactly "why" it's bad, other than it feels like it is ;-)

giving each other discounts - What is the difference here between this and other's who make a living as a middleman? KMart might have a clothing manufacturer offering a discount to them compared to some other chain because they like the target market, or know they'll get good volume. Can't intel offer discounts on their chips, greater than just volume discount, to Apple because they'd love the boost to their image? MS prices OEM cheaper to get pre-installed. What differentiates these examples from the one in the FA? Does KMart or Apple have to show us the discount/markup made?

Accenture received more than $735,000 in payments from IBM for "favorable treatment and influence" . This sure sounds worse, as they are Payments rather than discounts. Isn't it the same thing though? I assume they are only payments based on securing sales, so it's just the same discount in a separate transaction. Where is the line drawn?

I'm not encouraging this or claiming it should go unpunished, but I know if I'd been in a management position along the line I don't know how/why I could/should be stopping such things (defensibly).