FBI’s Carahsoft raid tied to price-fixing allegations

Yesterday's FBI raid of Carahsoft was linked to allegations that the Pentagon contractor had for years worked with ostensible competitors to illegally fix prices for their services, according to documents filed in federal court.

SAP, Accenture, and other firms are also under investigation for alleged violations of the False Claims Act that involved efforts to defraud government agencies, Bloomberg News reported.

On Tuesday morning, the FBI and Defense Criminal Investigative Service launched a joint raid on the company’s Reston, Va., headquarters, Nextgov/FCW first reported. 

Documents filed in the U.S. District Court for the District of Maryland last year indicate that the U.S. is looking into “whether Carahsoft conspired with other companies to rig bids, inflate prices, overcharge, and defraud the Department of Defense (DoD), among other federal government agencies” when it resold the products. The specific companies in question were redacted in the documents that Nextgov/FCW retrieved; Bloomberg cited an unredacted version.

For a year, the documents said, Carahsoft “had not produced the full set of transaction records (including but not limited to the communications, solicitations, proposals, quotes, bids, award notices, orders, purchase orders, and invoices) for even a single project” for the Justice Department and others involved, which could have prompted the raid.

“We can confirm that DCIS executed a joint search warrant operation with the FBI in northern Virginia yesterday morning. We have nothing further to add, as this is an open investigation,” a spokesperson for the Defense Department’s audit office said in a statement. 

Richard Conway, an attorney for Carahsoft, did not return a request for comment. A company spokesperson also did not comment on the new details of the raid.

“All we can say is that there has been a civil investigation by the DOJ, and SAP has been cooperating with the investigation since the beginning,” an SAP spokesperson told Nextgov/FCW via email.

An Accenture spokesperson said, “Accenture Federal Services is responding to an administrative subpoena and is cooperating with the DOJ.”

Carahsoft employees were told Tuesday the raid was “part of an investigation into a company with which Carahsoft has done business in the past” and that the company is fully cooperating and "operating business as usual,” according to an email sent by Carahsoft President Craig Abod and obtained by Nextgov/FCW.

For months, frustration had mounted among DOJ lawyers, who claimed in court proceedings that the government’s document requests and inquiries appeared to be delayed or unfulfilled by Carahsoft.

“We have offered to rewrite the question, but the response we’ve gotten from Carahsoft is saying that they don’t want to answer the question,” Justice Department trial attorney Samson Asiyanbi said. “And it seems to us that they just don’t want to answer it. And rather — because they don’t want to answer it, they are coming up with all sorts of reasons why they shouldn’t be required to do so.”

The Justice Department may have reached a tipping point in its investigation and decided the best course of action was to raid the company in order to preserve evidence, said Jay Holland, a principal attorney at Joseph, Greenwald & Laake, a law firm based in Maryland.

False Claims Act investigations vary by case, but if a raid was launched, it likely reflects earlier investigative work, Holland said.

“They’re not going to start out by raiding companies' headquarters,” he said in a phone interview. The DOJ “would have done a significant amount of investigation…and determined that the gravity of the case warranted it.”

Carahsoft is a leading IT vendor and reseller of technology products and services to public-sector organizations, with prime spots on key federal governmentwide acquisition contracts such as NASA's Solutions for Enterprise-Wide Procurement and the General Services Administration's Multiple Award Schedule.

The raid occurred during the busiest time of the year for federal contractors. The U.S. government’s fiscal year ends Sept. 30, when agencies have to finalize budgets, allocate remaining funds and push through last-minute contracts before the deadline.

A Carahsoft employee, speaking on the condition of anonymity for fear of retaliation, said that account representatives handling client relationships were directed by team leads to calm down vendors and assure them that there was nothing to fear.

Carahsoft paid a $75 million fine to the government in 2015 to settle claims that the company and partner firm VMWare overcharged the government and concealed commercial pricing arrangements. Carahsoft did not admit wrongdoing in the settlement.

GovExec’s Frank Konkel and Washington Technology’s Nick Wakeman and Ross Wilkers contributed to this report.

Editor’s note: Carahsoft is an advertising client of Nextgov/FCW.