Ernst & Young, Capgemini Agree to $20 Million Travel Expense Settlement
The class action travel-billing lawsuit that has plagued Big Four firms Ernst & Young, PricewaterhouseCoopers and KPMG, and consultancies BearingPoint and Capgemini has finally come to an end. E&Y has agreed to a settlement of $18 million in the controversial lawsuit, and Capgemini has agreed to settle for $2 million.
The class action lawsuit, filed by lead plaintiff Warmack-Muskogee LP, a former PwC client that operates an Oklahoma shopping mall, and E-Z Mart Corp., a former EY client that operates a chain of convenience stores, sought to resolve discrepancies in travel expenses billed by the big firms to their clients.
The firms were accused of being in collusion with one another to acquire rebates from travel agencies for the large volume of airfares booked through the agencies and then not passing those rebates on to their clients in the form of reduced fees for travel expenses. The firms argued that the rebates offset other firm expenses and enabled the firms to charge lower billing rates, and that without the rebates, billing rates would have been higher so in the end the clients did indeed benefit from the rebates.
The lawsuit was filed in state court in Texarkana, Arkansas in October 2001. None of the firms charged in the suit admitted to any wrongdoing, but all of them have now stopped the practice of receiving rebates on travel expenses and instead now pass through their actual cost of travel expenses to clients.
"We are pleased to have resolved this issue in a reasonable and equitable manner," said EY spokesman Charles Perkins. "We now bill clients directly at the discounted rates we receive from travel companies, having changed our policy in January 2002."