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Commitments and Contingencies
9 Months Ended
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
NOTE H – COMMITMENTS AND CONTINGENCIES
The Company, various subsidiaries, and certain current and former officers have been or, from time to time, may be named as defendants in various lawsuits and claims arising in the normal course of business. The Company may also become involved with contract issues and disputes with customers, including government customers.
On March 24, 2014, the U.S. Department of Justice (DOJ) filed under seal in the United States District Court for the District of Columbia a complaint against the Company in partial intervention under the qui tam provisions of the civil False Claims Act (FCA). The underlying complaint was filed under seal by an individual plaintiff on August 24, 2009. On May 29, 2014, the case was unsealed. Both the DOJ and the individual plaintiff filed amended complaints. The complaints related to government sales transactions under the Company’s General Services Administration (GSA) schedule contract, entered into in 2002 and extended until present through subsequent amendments. In sum and substance, the complaints alleged that the Company provided inaccurate commercial discounting information to the GSA during contract negotiations and that, as a result, the GSA’s contract discount was lower than it otherwise would have been. In addition, the complaints alleged that the Company failed to apply the full negotiated discount in some instances and to pay sufficient rebates pursuant to the contract’s price reduction clause. In addition to FCA claims, the complaints also asserted common law causes of action. The DOJ complaint sought an unspecified amount of damages, including treble damages and civil penalties. The complaint by the individual plaintiff alleged that the U.S. government suffered damages in excess of $100 million and sought an unspecified amount of damages, including treble damages and civil penalties. On October 30, 2014, the GSA Suspension and Debarment Division issued a Show Cause Letter to the Company in response to the complaints summarized above. In sum, the letter called on the Company to demonstrate why the U.S. government should continue to contract with the Company, given the litigation allegations made in the complaints. On December 19, 2014, the Company provided a detailed response to the Show Cause Letter. In July 2015, after the Company agreed to assume certain additional reporting requirements during the pendency of the litigation, the GSA Suspension and Debarment Division advised the Company that it had concluded its review and determined that the Company is a responsible contractor with which government agencies could continue to contract. On October 24, 2016, the DOJ, the Company and the individual plaintiff filed a joint motion advising the court that they had reached an agreement-in-principle to resolve the litigation and requesting an extension of the court schedule to permit the parties to draft and execute a formal settlement agreement. Also on October 24, 2016, the court granted that joint motion. The agreement-in-principle reached by the parties called for settlement of the litigation for a payment of approximately $45 million without admitting any wrongdoing and, as a result, the Company increased its reserve for this case during the second quarter of fiscal year 2017. The parties have drafted a formal settlement agreement which would resolve the case for the amount agreed upon in October 2016 and are awaiting internal DOJ approval before signing the agreement. Pursuant to the settlement agreement, the Company expects to make payment in the fourth quarter of fiscal year 2017. Upon payment, and pursuant to the settlement agreement, the parties would then move the court to dismiss the case with prejudice. The parties anticipate that the court would approve the settlement and dismiss the case. The Company and the individual plaintiff have reached an agreement-in-principal relating to the individual plaintiff’s claims for attorneys’ fees and litigation expenses and have drafted a formal settlement agreement to resolve those claims for approximately $4 million. That settlement amount is fully reserved and the parties expect the formal agreement to be signed once internal DOJ approval is granted for settlement of the larger case. Payment of the settlement relating to the individual plaintiff’s claims for attorneys’ fees and litigation expenses is expected to be made in the fourth quarter of fiscal year 2017.
With respect to litigation in general, based on the Company’s experience, management believes that the damages amounts claimed in a case are not a meaningful indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of cases. The Company believes that it has meritorious defenses in connection with its current lawsuits and material claims and disputes, and intends to vigorously contest each of them.
In the opinion of the Company’s management based upon information currently available to the Company, while the outcome of its lawsuits, claims and disputes is uncertain, the likely results of these lawsuits, claims and disputes are not expected, either individually or in the aggregate, to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the effect could be material to the Company’s results of operations or cash flows for any interim reporting period. The settlement agreements detailed above, if executed, will have a negative effect on quarterly and full fiscal year cash flows. For some matters, the Company is unable to estimate a range of reasonably possible loss due to the stage of the matter and/or other particular circumstances of the matter. For others, a range of reasonably possible loss can be estimated. For those matters for which such a range can be estimated, the Company estimates that, in the aggregate, the range of reasonably possible loss does not exceed $20 million. This is in addition to amounts, if any, that have been accrued for those matters.
The Company is obligated to indemnify its officers and directors under certain circumstances to the fullest extent permitted by Delaware law. As a part of that obligation, the Company may, from time to time, advance certain attorneys’ fees and expenses incurred by officers and directors in various lawsuits and investigations, as permitted under Delaware law.