Cimino v. International Business Machines Corp., No. 19-7139 (D.C. Cir. 2021)Annotate this Case
Cimino, a former IBM senior sales representative, filed a qui tam action, alleging that IBM violated the False Claims Act, 31 U.S.C. 3729(a)(1)(A), by fraudulently inducing the IRS to enter a $265 million license agreement for “unwanted, unneeded” software. IBM allegedly devised a scheme to pressure the IRS into a long-term renewal deal by conducting an audit, anticipating that the IRS was overusing the software and therefore would owe significant compliance penalties. IBM would then offer to waive penalties in exchange for a new agreement. Contrary to IBM’s expectations, Deloitte’s initial audit showed the IRS was not significantly overusing the licenses. IBM never released these audit results to the IRS but worked with Deloitte to manipulate the results. Deloitte eventually presented the IRS with a false audit. Once the new agreement was in place, IBM allegedly charged an $87 million fee for prospective licenses and support, which “were, upon information and belief, never actually provided.”
After a four-year investigation, the government declined to intervene in the qui tam case. The district court dismissed Cimino’s complaint. The D.C. Circuit reversed in part. In light of Supreme Court precedents interpreting the FCA to incorporate the common law, but-for causation is necessary to establish a fraudulent inducement claim. Cimino plausibly pleaded causation, as well as materiality. The court affirmed the dismissal of Cimino’s presentment claims because he failed to plead them with the requisite particularity.