Dell Settles With Uncle Sam Over Army Bid-rigging Claims

The US Department of Justice has reached a $4.35 million settlement with Dell and its reseller Iron Bow over claims that the two businesses colluded to rig bids for business with the US Army.

The case stems from the $5 billion Army Desktop and Mobile Computing – 3 (ADMC-3) contract that the Army uses to procure hardware and associated services.

The government contended that Dell bid to supply equipment under the contract and quoted high prices, but also offered Iron Bow discounted pricing on its products. Doing so meant the reseller would win the deal – but Dell would still shift its product. The DOJ alleged this is a violation of the False Claims Act.

"The United States contends that pursuant to Dell’s deal registration program, Dell and Iron Bow agreed for Iron Bow to have preferred pricing to sell Dell computer hardware products on specific solicitations issued under ADMC-3 and that Dell submitted bids to the Army that Dell and Iron Bow knew would be higher than Iron Bow's bid, thereby creating the false appearance of competition," the settlement document [PDF] reads.

The kicker is that Dell’s bid was so high that Iron Bow’s bid looked good – even though the reseller’s quotes were also allegedly expensive.

"The United States contends that this influenced the Army's source selection process and caused Iron Bow to overcharge the Army under ADMC-3 for Dell products sold by Iron Bow under Dell’s deal registration."

The case came to light when Brent Lillard, CEO of rival reseller Govsmart, blew the whistle on the alleged deal – leading to an investigation.

To settle the case, Dell will pay $2.3 million - $1,358,475 in penalties, with the remainder covering interest and legal fees.

"Dell has entered into a settlement agreement because we believe it is in the best interest of Dell, our customers and partners," the company told The Register. "The settlement is not an admission of guilt or liability."

Iron Bow will pay $2,051,000 to resolve the allegations – also without admitting guilt.

"Iron Bow settled this matter without any admission of liability to avoid further delays, uncertainty, inconvenience, and the expense of potential litigation," the company told us. "Iron Bow cooperated with the Department of Justice throughout its investigation of Dell pursuant to a Qui Tam Complaint against Dell and has maintained its position throughout that investigation."

Once Dell's portion of the settlement is paid, Lillard will receive a $345,000 whistleblower award for reporting the matter.

• Multi-level marketing corporation that sells weight loss products sues ex-exec over 'fraudulent' Dell deal
• US army bites the bullet in $50m software piracy pay-out
• Cyber-sec biz Fortinet coughs up $545,000 after 'flogging' rebadged Chinese kit to Uncle Sam – but why so low? We may be able to explain
• US Department of Defense to sling an estimated $3.17bn at Microsoft resellers

The government might not be happy but has agreed to settle the whole case, albeit with some strong words - if not a strong fine.

"Fraud in the government contracting process costs taxpayers untold dollars each year," said US Attorney Prim Escalona for the Northern District of Alabama. "We will continue to work with our federal law enforcement partners to investigate and pursue those who commit government contracting fraud."

At last year's Dell Technologies World conference in Las Vegas, Iron Bow took home an award for "Excellence in Marketing", with the manufacturer praising its "creative and effective marketing campaigns" and sales record.

"We set our sights on this award last year and made it a personal goal for our team to achieve it," Iron Bow chief marketing officer Sarah Kim said at the time. "We’re looking forward to launching more exciting campaigns in the months ahead that empower our federal customers to meet their mission objectives more effectively with Dell Technologies’ innovative solutions." ®