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GATEWAY COMPUTER PAYS $9 MILLION TO SETTLE

WASHINGTON, D.C. -- Gateway, Inc. has agreed to pay the United States $9 million to settle allegations that the computer manufacturer failed to give required price reductions to the federal government from May 1994 through March 1997, the Justice Department and the

U.S. Attorney for the District of South Dakota announced today. The claims arise out of a contract between the North Sioux City, South Dakota-based computer company and the General Services Administration (GSA), the federal agency that provides and manages federal government office space across the country and negotiates with federal contractors to provide products and services to support the U.S. government's workforce.

The contract, which set purchase terms for Gateway's computers and computer components that could be bought by federal agencies, stipulated that the government was to get the benefit of any price reductions. Under the provisions of the contract, if Gateway reduced prices between the time the government ordered products and when the company shipped those products, the government was to be charged only the price as of the shipment date.

"It is absolutely essential that contractors comply with government contract requirements and monitor closely their compliance with those requirements," said David W. Ogden, Assistant Attorney General of the Civil Division.

However, from May 9, 1994, to January 31, 1997, Gateway had no system in place to ensure compliance with this contractual requirement and, thereafter through March 31, 1997, the computer manufacturer had an inadequate system. Consequently, Gateway routinely failed to pass along to the government price reductions that had occurred between order and shipment.

"With this settlement, the United States will recoup the substantial overpayments to Gateway which were initially borne by the taxpayers," said U.S. Attorney Ted L. McBride. "It will further assure that every federal agency and the public can have greater confidence in the integrity of the contracting process."

The case was investigated by the Justice Department's Civil Division, the General Services Administration and the U.S. Attorney's office for the District of South Dakota.

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