Oracle could be shown the hand of the law if claims that it tried to “stonewall” a whistleblower lawsuit and shelled out a $200 million settlement fee after the case had already gone to court, are found to be true.
Shareholder Jordan Weinib is going after the company claiming that CEO Larry Ellison and his gang of past and present directors agreed on the settlement with the US government after costly legal action had already been taken. He said the board had wound up huge fees because it had insisted on “digging in and litigating the matter”, despite knowing that the whistleblowers accusations were correct.
He said the end result of the huge costs, instead of a small fine, meant that Oracle had breached its duty to shareholders.
“The board forced the government to expend additional resources litigating the action when the board knew the company was in a significant liability position and that additional litigation would certainly raise the ultimate price of settlement,” Weinrib said in the complaint.
The argument stems from a lawsuit filed by the whistleblower – Oracle’s former senior director of contract services, Paul Frascella – in 2007. At the time he accused the company of violating price-reduction clauses in federal contracts covering $775 million in goods, extending discounts to commercial clients without doing the same for government buyers.
Not liking the claims, the US Department of Justice waded into the lawsuit in 2010, which led to Oracle paying the $200 million settlement in 2011. This included interest and payments for the whistleblower and racked up a bill that is claimed to be the largest of its kind under the federal False Claims Act.
He said that by litigating the case, Oracle drove up the ultimate settlement price, “harming taxpayers and shareholders alike.”
He continued to point the finger at Ellison, claiming that the board didn’t adopt safety measures such as tracking systems, internal controls and policies to prevent the fraud happening in the first place.
Weinrib now wants an undisclosed amount in damages on behalf of shareholders.