It won't be easy, or cheap, to cancel deal (CA, Oracle scandal)

SF Chronicle ^ | 5/4/02 | Carrie Kirby

[randita]

It won't be easy, or cheap, to cancel deal

RIPPLE EFFECT: Bank has already spent millions, likely to want money back

Carrie Kirby, Chronicle Staff Writer

Saturday, May 4, 2002

Undoing the state's deal to buy $95 million worth of Oracle software may not be easy.

Although both sides say they are willing to walk away from the deal, labyrinthine financial maneuvers after Oracle's agreement with the state make it difficult to see who has California's money now and who is obligated to return it.

"While we are prepared to unwind our involvement in the contract, there are multiple parties in this transaction who would also need to agree to unwind their involvement in the contract for the contract to be completely undone," Oracle spokesman Jim Finn said Friday in a prepared statement.

Although California wasn't required to make its first payment until Sept. 1, a third-party lender has already paid out $52.7 million on the state's behalf.

Here's what happened, according to the Department of General Services' audit of the transaction:

-- Logicon, the Northrop Grumman subsidiary that arranged the deal, transferred its right to serve as the state's lender to another firm, Koch Financial in Scottsdale, Ariz.

-- On Aug. 31, 2001, Koch agreed to pay Logicon $52.7 million on behalf of the state.

-- Logicon in turn agreed to pay Oracle $36.5 million, keeping the remaining $16.2 million for itself.

The Department of General Services believes that the amounts agreed upon have actually been paid, said Elaine M. Howle, the state auditor who issued the report exposing the deal.

STATE OBLIGATION UNCLEAR

"Koch Financial is likely to assert that the state is obligated to repay the loan," Howle wrote in her report.

But the state auditor said it is not clear whether the state is legally obligated to pay Koch back.

"Koch Financial acted in good faith, funded this loan and there may be a question of whether the state is on the hook for the $52 million to pay Koch Financial back," she said. "I'm sure the attorney general's office is looking into that."

On Friday, Attorney General Bill Lockyer said he was looking into whether Logicon violated conflict-of-interest laws by consulting with the state on technology issues and working with Oracle on the software contract.

Neither Koch Financial nor Logicon returned reporters calls Friday.

REFUND UNCERTAIN

Oracle's Finn does not yet know whether it would refund the money it has already been paid.

"We haven't started any of these conversations," he said.

When considering a refund, Oracle would have to take into account whether any state employees have used the software licenses so far. Oracle's database products enable offices to automate processes such as payroll.

Logicon, which has its headquartered in Herndon, Va., specializes in helping governments select and install large software systems. In this deal, Logicon worked with the state, first as a reseller of Oracle software, and later as a financing agent. Logicon also agreed to support the state's software installations by providing a help desk as an Oracle subcontractor.

To complicate matters even further, Koch may have already sold the right to collect on Oracle's debt to one or more other financial institutions. Corporate loans are often resold to syndicates of 10 or more investment banks.

E-mail Carrie Kirby at ckirby@sfchronicle.com.

05/04/2002 - AG says firm in computer deal may have violated conflict law .

05/04/2002 - Focus shifts to 2nd firm in probe of Oracle pact.

04/18/2002 - Lawmakers review contract that audit says could cost millions .

©2002 San Francisco Chronicle   Page A - 1  

 

[randita]

Now it's clear why Atty. Gen. Lockyer is going after Logicon, charging conflict of interest.

He knows there's no way the contracts can be canceled easily--the state's on the hook as a result of Davis' greed and incompetence.

[randita]

another one for the junkies

[stands2reason]

And we appreciate it! :-}

[Tacis]

Come on, let it drop!! This is just another of a long line of instances to try to screw Davis, his friends, his relatives and the relatives of his friends (Condit's kids!) out of their fair cut of the graft, payoffs and kickbacks that they weaseled fair and square. What's the point of being a democrat in an elective position if you and your associates can't skim a little off the top? We all knew what they were like and what they would do when we (or they!) elected them. It isn't fair to be critical now just because they were theives like we knew they would be. The CA taxpayers take it in the shorts, yet again! And folks are surprised?

[Ernest_at_the_Beach]

calgov2002:

calgov2002: for old calgov2002 articles. 

calgov2002: for new calgov2002 articles. 

Other Bump Lists at: Free Republic Bump List Register

[John Jorsett]

With all of these shenanigans under just one contract, it makes one wonder just what else is happening that we're just not aware of. The state lets thousands of contracts each year. It would be interesting to give a few more the kind of scrutiny that this one is getting just to see what crowls out from under the rocks. At a minimum, I hope some enterprising reporters take a look at some of the other non-competitive-bid contracts the state has put out in the last 3 years.

[AmericaUnited]

GOOD! We need this to be sticking around Davis's neck till at least November.

[The Duke]

Bill Clinton would have ridden this one out and finished smelling like a rose. Of course he wore armor made of newspaper.

[Ernest_at_the_Beach]

Been doing some poking around and found this:

Koch Financial.

Which would seem to be part of a holding company Unifin. Now one of the Koch brothers is a big Conservative Billionaire and owner of the Wichita, KS oil Company Koch Oil.

On another issue, If you see this note first thing in the morning do check the SF Chronicle for a possible blockbuster story and ping me!.