Cisco/Westcon Settle Government Overcharge Claims for $48 Million

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What happens when a technology company overcharges the U.S. government? In the case of Cisco Systems Inc. and Westcon Group North America, the answer is to settle the claims with the Justice Department and move on. Bloomberg Businessweek reported the two companies have agreed to pay $48 million to settle the claims that they overcharged the U.S. government. 


The source of this dispute stems from a General Services Administration contract. Cisco and Westcon – which is a Cisco distributor – have been accused of overcharging taxpayers through this contract. The settlement puts to rest a lawsuit that was originally filed by whistleblowers Norman Rille and Neal Roberts in Little Rock, Arkansas. The suit was filed under the federal False Claims Act.The same men previously filed lawsuits against Hewlett-Packard Co., EMC Corp, International Business Machines Corp., Computer Sciences Corp. and PricewaterhouseCoopers LLP. These claims were also settled by the Justice Department. “Overcharging the government results in waste of taxpayer dollars,” Brian D. Miller, GSA inspector general, said in a statement. “Our auditors and special agents keep vigilant watch to ensure contractors stay honest.”

Kristin Carvell, a spokeswoman for San Jose, California- based Cisco, referred to the company in a statement as “very pleased” with the resolution.“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 said. “Westcon continues to have an active contract with the GSA, and Westcon and many other distributors continue to sell a broad range of Cisco equipment to the federal government.”

According to Jeff Touzeau, a spokesman for the Westcom Group, the allegations included in the claims refer to business practices from a number of years ago and no longer reflect current operations. He stressed the settlement in no way affects its current government business or its relationship with Cisco. In other Cisco news, the company announced plans last week to acquire privately held Arch Rock Corp., a pioneer in Internet Protocol-based wireless network technology for smart-grid applications. 

This acquisition is expected to enable the company to offer a comprehensive and highly secure advanced metering infrastructure solution that is fully IP and open-standards based.

Keeping with its acquisition plans, Cisco also revealed its intention to acquire content management specialist ExtendMedia, a privately-held software maker whose products help service providers deliver video-over-IP networks. ExtendMedia should help to strengthen Cisco's position in the delivery of IP video services by enabling service providers to provide a more interactive and personal experience.


Susan J. Campbell is a contributing editor for TechZone360 and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

Edited by Juliana Kenny
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