NetApp to pay feds $128 million to settle False Claims Act investigation

netapp_new_logo_colorNetwork storage equipment maker NetApp will pay the U.S. government $128 million in a settlement reached through the Department of Justice, according to a regulatory filing. The settlement was reached on behalf of the General Services Administrations and related to an investigation into NetApp’s compliance with price reduction clauses in some of its contracts with the GSA between August 1997 and February 2005. NetApp previously recorded the charge during its fiscal 2009 third quarter in anticipation of the settlement.

Last year the company received a subpoena from the GSA’s Office of Inspector General regarding potential violations of the False Claims Act in connection with its government contracting activity.

In its annual report last year, NetApp said that if it were found in violation of the False Claims Act, it could result in the “imposition of a damage remedy which includes treble damages plus civil penalties, and could also result in us being suspended or debarred from future government contracting.” NetApp characterizes the U.S. government as “an important customer.”

With the payment of the $128 million, the government agreed to release NetApp with respect to the claims alleged in” its investigation, although the agreement “reflects neither an admission nor denial by NetApp of any of the claims alleged by the DOJ, and represents a compromise to avoid continued litigation and associated risks.”

The complete agreement was not included with today’s SEC filing but will be filed as an exhibit to NetApp’s next annual report for the period ending April 24, 2009.


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