FOR IMMEDIATE RELEASE CIV
WEDNESDAY, JULY 26, 2000
TDD (202) 514-1888
COMPAQ COMPUTER TO PAY $4.5 MILLION
FOR OVERCHARGING DEFENSE DEPT.
Settlement resolves allegations that Digital Equipment Corporation inflated labor costs
WASHINGTON, D.C. - Houston-based Compaq Computer Corporation has agreed to pay the United States $4.5 million to settle claims that Digital Equipment Corporation, which Compaq purchased in 1998, inflated its labor costs on a Defense Department contract to install computer network equipment, the Justice Department announced today.
In 1995, four years after entering into the government contract, Digital submitted a report to the government in which it admitted that it had inflated its labor charges on some work performed in Orlando, Florida, and Frankfurt, Germany. The government's subsequent investigation concluded that Digital's overcharges on the PC-LAN (personal computer - local area network) contract extended beyond what had been reported by the company.
Among other things, the government determined that Digital had converted the costs of some parts, as well as shipping and warehousing, into labor hours. Digital also improperly billed travel time as a direct cost and had charged for some work using a higher billing rate than the contract permitted. The PC-LAN contract concluded in 1996.
Digital no longer exists as an independent entity. The settlement announced today resolves all pending False Claims Act claims arising out of Digital's Voluntary Disclosure Report.
"We are pleased with this settlement," said David W. Ogden, Acting Assistant Attorney General for the Justice Department's Civil Division. "Cases like this demonstrate the Justice Department's continuing commitment to ensuring that government contractors do not overcharge the United States on goods or services."
The government's investigation was conducted by the Department's Civil Division; the Defense Criminal Investigative Service, the investigative arm of the Defense Department's Office of Inspector General; the Naval Criminal Investigative Service and the Defense Contract Audit Agency.