Davis aides start talks with Oracle to drop contract
By Ray Locker
ASSOCIATED PRESS
May 6, 2002
SACRAMENTO – The state's finance director began talks with Oracle Corp. Monday to discuss killing the state contract auditors called wasteful, an administration spokesman said.
Finance Director Tim Gage will meet this week with Oracle executives to negotiate an end to the state's six-year, $95 million, no-bid contract to buy and administer database management software from Oracle, said Steve Maviglio, press secretary for Gov. Gray Davis.
The talks could take up to two weeks, Maviglio said.
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"We want to do this thoroughly and carefully, not quickly," he said.
The negotiations come as a legislative committee investigating the state's software contract with Oracle is scheduled to hear testimony from eight Davis administration officials.
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The Joint Legislative Audit Committee hearings led by Assemblyman Dean Florez will focus on the roles of two Davis aides – Cynthia Curry, a top lawyer in the General Services Department, and Kari Dohn, a Davis policy adviser.
Curry will be asked how the contract was reviewed before it was signed, Florez told the Orange County Register. Dohn will be asked if Davis was told about the contract.
Davis has said he didn't know about the contract before it was signed.
Also testifying will be Elias Cortez, the suspended state technology chief, and Betty Yee, the chief deputy director of the Department of Finance.
Originally touted as a way for the state to save money through volume software purchases, the contract has turned controversial as a state auditor report says it would cost taxpayers as much as $41 million more than if the state had relied on previous suppliers. The state and Oracle had said the contract would save the state $16 million.
Oracle has disputed Auditor Elaine Howle's report, saying she severely underestimated the state's future database needs.
Last week, Oracle officials said they would end the contract with the state, and on Saturday officials from Logicon Inc., the company packaging the software with Oracle, said they, too, would drop the contract.
Logicon, which stands to earn $28.5 million from the contract, prepared the cost-saving estimates that state officials relied upon when negotiating the deal, Howle said.
The state Senate is set to vote on a bill by Sen. Debra Bowen, D-Marina del Rey, that would prohibit technology consultants from bidding on contracts they helped draft, legislation that would specifically deal with Logicon's role.
Davis and his predecessor, Republican Gov. Pete Wilson, have vetoed similar bills.
On Sunday, Maviglio welcomed the Logicon offer but said that while Gage will meet Monday with Oracle, no meeting with Logicon has been arranged yet.
The contract has become a political embarrassment for Davis as he prepares for a fall re-election campaign against Republican Bill Simon.
Republican critics have suggested the contract is at least an example of incompetence by the Davis administration and that it may also involve corruption.
A series of events have whipped up a frenzy surrounding the contract: The no-bid deal signed May 30, 2001, could cost the state up to $41 million, Howle's audit said. State campaign finance records show Davis' re-election campaign reported a $25,000 contribution six days after the contract was signed. The contribution check was delivered by an Oracle lobbyist, Ravi Mehta, in a Sacramento bar to Arun Baheti, Davis' chief technology adviser.
These revelations led to the resignation April 26 of Barry Keene, a former legislator and Davis' head of the Department of General Services. A series of e-mails sent by members of Davis' staff indicate that Davis may have known about the contract before it was signed. Last Thursday, Baheti resigned, saying he should have "more vociferously raised questions" about the contract before it was signed. Cortez was suspended.
Also Thursday, reports of unspecified shredding of papers at the Department of Information Technology office led the Davis administration to send state Highway patrol officers to the office and to order that all shredding, regardless of the purpose, be stopped.
Davis said he didn't know about the Oracle contribution, and Oracle executives denied the donation was an attempt to buy influence. However, Oracle officials called it "definitely bad judgment" for Mehta to give the check to Baheti, as he was involved in the contract talks.
The governor's office has a written policy against administration officials accepting campaign donations.
Ken Glueck, Oracle's vice president of government affairs, said he authorized the donation in March 2001 and wasn't aware of the state contract until after the deal was signed.
He said it took several weeks for the contribution check to reach him in Washington and then it sat on his desk for several more weeks before he forwarded it to Mehta in Sacramento.
Although Oracle and Logicon contend the contract is a good deal for the state, they are willing to end it. That might not be easy because of the involvement of other firms and complications in the deal, Oracle spokesman Jim Finn said.
For example, a third-party lender, Koch Financial, has already paid out $52.7 million on the state's behalf, $36.5 million to Oracle and $16.2 million to Logicon.
Koch probably will contend that the state must repay the loan, Howle said.
