An Oracle Corp. investor sued the company and members of its board of directors on Thursday for allegedly trying to stonewall a whistleblower lawsuit that ultimately resulted in a $200 million settlement.
The lawsuit filed by investor Jordan Weinrib in Delaware state court said the defendants, including Oracle CEO Lawrence Ellison and other past and present members of the company's board of directors, breached their duty to shareholders by engaging in prolonged litigation over the whistleblower's allegations, which the defendants allegedly knew to be true.
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 settlement in question was the result of a whistleblower lawsuit filed in 2007 by Oracle's former senior director of contract services, Paul Frascella, who 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.
The U.S. Department of Justice intervened in the lawsuit in 2010. In 2011, Oracle paid more than $200 million to settle the lawsuit, including interest and payments for the whistleblower, the largest of its kind under the federal False Claims Act.
Despite substantial evidence of wrongdoing, Oracle's board of directors did not admit that these acts had occurred, enact remedial measures and negotiate a resolution that involved a small payment, Weinrib said in the complaint. Instead, by litigating the case, Oracle drove up the ultimate settlement price, harming taxpayers and shareholders alike, Weinrib said.
Weinrib is seeking an unspecified amount in damages on behalf of shareholders. A spokesman for Oracle did not immediately return a request for comment Thursday.
The case is Weinrib v. Ellison, in Delaware Chancery Court, no. 7350.
(Reporting by Jessica Dye; Editing by Matt Driskill)