(Bloomberg) — US prosecutors are broadening a probe of potential price-fixing by German software maker SAP SE and tech reseller Carahsoft Technology Corp., seeking to examine the companies’ work with almost 100 government agencies, according to new court records that show the scope of the investigation is far greater than previously known.
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The Justice Department sent Carahsoft a legal demand for documents and information on 94 civilian government agencies with which it has done business for SAP products, according to a document filed in Baltimore federal court Tuesday. In it, the company characterized the prosecutors’ demand as “dramatically expanding” a civil probe that was already examining whether the companies overcharged the military and some other parts of government on purchases of more than $2 billion worth of SAP technology since 2014.
The investigation’s expanded reach across the US government, which hasn’t been previously reported, signals the depth of legal risk it poses to a top technology vendor and to Germany’s most valuable company. Many investigations end without any formal accusations of wrongdoing.
SAP shares fell 1.6% to €200.60 at 9:52 a.m. in Frankfurt on Thursday, after earlier falling as much as 2.3%. The stock had risen 46% this year through Wednesday.
An SAP spokesperson, Joellen Perry, said the company and its US-based unit, SAP National Security Services, Inc., each received document demands from the Justice Department in August 2022 and have been cooperating with the civil investigation. The demands were “broad and seek documents relating to bidding and pricing practices by SAP and its resellers (including Carahsoft), but the information SAP has produced to date has been more narrowly focused,” Perry said.
A lawyer for Carahsoft, William Lawler III, declined to comment. On Tuesday, Lawler asked a judge to seal the records describing the expanded scope of the civil investigation, saying it included “several unsupported substantive allegations about Carahsoft and its business partners.”
A Justice Department spokesperson also declined to comment.
In June 2022, the Justice Department demanded information from Carahsoft about whether the company and SAP overcharged the US government by making false statements to the Department of Defense, according to court records. Investigators later asked Carahsoft to hand over records related to the Department of Agriculture, Department of Labor, Office of Personnel Management and the Centers for Disease Control and Prevention, Lawler wrote in the Tuesday court filing. The company declined because doing so would cause it to miss a deadline to produce the other records, he said.
Prosecutors responded this July by sending Carahsoft another information demand expanding the investigation to cover “the entire US Government for SAP products or services through SAP or resellers,” Lawler told the court. The demand covered 94 agencies, he said, and Carahsoft has unsuccessfully tried to get prosecutors to narrow it.
Last week, FBI and Department of Defense investigators searched Carahsoft’s Virginia office. Bloomberg News also disclosed the Justice Department civil inquiry last week.
It’s not clear if the FBI’s search is related to the civil probe involving Carahsoft and SAP. An SAP spokesperson previously said the company is not involved in any criminal investigation related to Carahsoft and has no information about “the latest events” concerning its vendor.
A Carahsoft spokesperson, Mary Lange, described the search as “an investigation into a company with which Carahsoft has done business in the past” and said the company was cooperating with the FBI probe.
The expanded scope of the civil case became public in a lawsuit prosecutors brought against Carahsoft in 2023 over the closely held firm’s handling of the government’s demand for documents the year before. In their recent filing, prosecutors wrote that the company “persists in its long pattern of delay and noncompliance.”
The Justice Department probe was brought under the False Claims Act, which allows the government to recover as much as three times its damages plus a penalty. However, lawsuits are often settled for lower sums.
Under both US and German law, companies must disclose investigations if the estimated impact on their business is material and likely to significantly move their share price.
SAP spokesperson Daniel Reinhardt said last week that the German company follows the rules around disclosing legal risks and that based on “the current circumstances, there was and still is no requirement to report on the individual case.”
Prosecutors looking at SAP sales are also examining the role of other companies, including a unit of the giant management and technology consulting firm Accentuate. An Accenture spokesperson previously said the company is cooperating with federal investigators. The company has said in regulatory filings that Accenture Federal Services made a voluntary disclosure to the US government, leading to a civil and criminal investigation about whether one or more employees made inaccurate submissions to the government about the company’s offerings.
Accenture spokesperson Deirdre Blackwood said that “the two situations are wholly unrelated.”
(Updates with statement from Accenture in last paragraph)
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