Posted on 05/04/2002 7:12:06 AM PDT by randita
Focus shifts to 2nd firm in probe of Oracle pact
CONFLICT INQUIRY: Logicon advised state while helping software company
Robert Salladay, Chronicle Sacramento Bureau Saturday, May 4, 2002
Sacramento -- As executives for Oracle Corp. and the state huddled Friday to cancel a flawed $95 million software contract, Attorney General Bill Lockyer focused his growing investigation on an Oracle business partner that allegedly hid its involvement in the final deal.
Investigators are looking into whether Logicon, a division of Northrop Grumman and an Oracle reseller in California, violated conflict-of-interest laws by consulting with the state on technology issues while working with Oracle on the software contract.
"I think it's more likely that Logicon has a problem more than anyone else, " Lockyer told reporters, "because they were serving two masters. They were working for the state and at the same time secretly working for Oracle, without knowledge of state officials of the circumstances, as far as I can tell."
State officials spent the day assessing the extraordinary events of Thursday as the Oracle contract unraveled. A key technology aide to Gov. Gray Davis resigned, another was suspended, and agents hauled away 12 sacks of shredded documents and hard drives from the agency that had pushed the Oracle deal.
Meeting for the first time with reporters about the Oracle mess, Davis said he knew nothing about the contract before it was signed. And Davis said he didn't know why a key technology official in his inner circle would pick up a $25,000 check from an Oracle lobbyist and send it to Davis' re-election campaign.
"I have no idea what he was doing, why he was doing it," Davis said. "It came as a complete surprise to me, and we intend to get to the bottom of it."
As for whether he knew about the contract, Davis replied: "I think most of you people know I am barely on the information on-ramp, much less proficient in technology, so this is not a matter that would come to my attention, nor did it."
As he spoke, a senior vice president of Oracle was negotiating with the governor's finance director over how to cancel the contract before California taxpayers are forced to pay out any money. The first payment to Oracle, for $14 million, is due in September. Lockyer and Davis said the state will work quickly, perhaps securing a settlement within days.
Logicon's connection to Oracle and its involvement in negotiating the contract will be the focus of a legislative hearing in two weeks. Lawmakers are dissecting a state audit that reports that the Oracle deal would cost taxpayers an unexpected $41 million, although the company disputes the findings.
A year before the Oracle contract was signed, Logicon was hired by the Department of Information Technology to write a "white paper" that would help the state figure out how best to sign long-term contracts for software and computers.
That paper eventually was shelved, and Logicon never asked for the $93,000 it was supposed to be paid for the work. Months later, Logicon was back again, this time offering to sell the state Oracle products through a so-called Enterprise Licensing Agreement.
The state eventually rejected Logicon, believing that a contract with the firm would violate single-source contracting laws because there were other resellers of database software, according to recent testimony before the Legislature. The state then started negotiating exclusively with Oracle.
According to the state auditor, Logicon worked a side deal with Oracle that would pay Logicon $28.5 million for helping Oracle finance the deal through a company called Koch Financial.
"Because of the magnitude of Logicon's stake in (the contract), and given Logicon's and Oracle's apparent failure to disclose that stake to the state at the time of the negotiation, we have serious doubts as to whether the state was able to negotiate Oracle's best price," the audit said.
A loophole in state law allows technology companies to both bid and consult on technology projects, but Lockyer said it appears Logicon hid its relationship from negotiators and may have violated conflict laws.
"Bill Lockyer is onto something," said Assemblyman Dean Florez, D-Shafter, chairman of the audit committee investigating the contract. "I think there is a conflict, and I think that conflict of interest wasn't disclosed by Logicon."
Florez said Oracle also should be faulted for not disclosing its side financing deal with Logicon.
In a statement, Logicon said its role in the Oracle "transaction was open and acknowledged by the state officials involved. The company believes it has acted appropriately and in good faith in all aspects of this transaction. While we have not had the opportunity to review the attorney general's comments, we believe he will come to the same conclusion when all the facts are known."
In testimony before Florez's committee two weeks ago, state Director of Finance Tim Gage said he didn't hear about Logicon's $28 million side deal until after it was signed, but he nevertheless was not surprised the company would be compensated by Oracle, since Logicon originally brought the contract idea to the state.
Lockyer said his chief deputy has talked with federal prosecutors, and Lockyer said they didn't see any evidence of a federal crime that would require the U.S. attorney to get involved. Lockyer's office has opened its own criminal investigation into the matter.
The governor's office said it has turned over all of the documents and information it is aware of on the Oracle contract to both the state auditor and Lockyer, who said Davis and his staff were cooperating fully and offered to make any staff member available for interviews.
Lockyer also said his office had no evidence that important documents had been shredded at the Department of Information Technology. The department has 24 shredders that it routinely used, but Lockyer said continuing to shred amid the controversy "seemed very foolish to me, given the environment."
In his Friday conversation with reporters, meanwhile, Davis said he has directed all state agencies to include negative as well as positive information when they seek approval from his inner circle on contracts and other projects.
Some top-level Davis aides said they weren't given enough information before they signed a so-called Governor's Action Request that approved the Oracle contract. Specifically, the governor's Department of Finance had serious concerns about the validity of the contract, but they were swept away with verbal assurances that the numbers had checked out, the aides said.
Davis said he doesn't second-guess the various agencies that review, analyze and sign contracts.
"Every month in this state there are literally hundreds and hundreds of transactions about which I have no personal knowledge, nor should I," Davis said. "They are being handled by professionals, mostly civil servants, who do the right thing."
Lawmakers have decided to call yet another high-level Davis aide to testify at an investigative hearing Monday probing the Oracle contract. Unlike the previous hearing, witnesses are expected to be put under oath.
Kari Dohn, a chief policy adviser to Davis, is expected to testify about her role in reviewing the Oracle contract and whether she briefed Davis on the deal. An inter-office e-mail suggests she was preparing to talk to the governor.
What's next
-- The Joint Legislative Audit Committee meets Monday to question top aides to Gov. Gray Davis about their role in the contract negotiations.
-- Attorney General Bill Lockyer continues his investigation into Logicon, a reseller of Oracle products, to determine whether it violated conflict-of- interest laws when it acted as a middleman in the transaction. Lockyer had already opened an investigation into the legality of the contract.
-- Officials with Logicon, Oracle and Koch Financial, a lender on the deal, are expected to testify before the audit committee later this month about their roles in the contract.
-- Attorneys from Oracle and the state work to rescind the contract.
-- The state Department of Information Technology, which pushed the contract, is scheduled to disband June 30 after a key lawmaker abandoned legislation that would extend the life of the agency.
"I think most of you people know I am barely on the information on-ramp, much less proficient in technology, so this is not a matter that would come to my attention, nor did it."
Gov. Gray Davis on the Oracle contract
"I think it's more likely that Logicon has a problem more than anyone else because... they were working for the state and at the same time secretly working for Oracle.''
Bill Lockyer
California attorney general
We have serious doubts as to whether the state was able to negotiate Oracle's best price.''
State audit of Oracle deal
"Bill Lockyer is on to something. I think there is a conflict and I think that conflict of interest wasn't disclosed by Logicon.''
Assemblyman Dean Florez
D-Shafter, chairman of the audit committee investigating the contract
"The company believes it has acted appropriately and in good faith in all aspects of this transaction. While we have not had the opportunity to review the attorney general's comments, we believe he will come to the same conclusion when all the facts are known.''
Logicon statement
E-mail Robert Salladay at bsalladay@sfchronicle.com.
Look for GENSA under PO Business Unit and add 'em up
You might notice Accenture while your at it.
Riordan spokeswoman Margita Thompson says Maviglio's comments are simply designed to divert attention from at least $117,000 in campaign donations from Enron that Davis has received since 1998.
Here is the link: (Davis received at least $117,000 from Enron)
This data needs to be recycled! Please post it, email and send it to friends and relatives.
Davis added, "Round up the usual suspects."
ROFL!!!
Oakland Council/BBI Construction
"35-1 Action on a report from the City Auditor regarding a proposed resolution (002301-ca)authorizing Amendment No. 1 to the agreement with BBI Construction, Inc., for the completion of design-build services related to the renovation of the AliceArts Center, including the Oakland School for the Arts Project, and increasing the contract amount by One Million Three Hundred Fifty-Five Thousand Dollars($1,355,000) for a total contract amount not to exceed One Million FourHundred Thousand Dollars ($1,400,000)
******
Quite a 'hefty' change from $45,000 to $1,400,000. Would that have been a 'low ball' bid to get the contract? Followed by this request for increase?
Now that is a design change of Mega proportions!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.