Oracle deal a rush job, lawyer testifies, Her warning not to sign was ignored, she says

SF Chronicle ^ | 5/7/02 | Robert Salladay

[randita]

Oracle deal a rush job, lawyer testifies

Her warning not to sign was ignored, she says

Robert Salladay, Chronicle Sacramento Bureau

Tuesday, May 7, 2002

Sacramento -- A state lawyer testified Monday that she was given just hours to review a hastily drafted contract with Oracle Corp. but felt pressure from "a higher authority" to remain quiet about her misgivings.

Cynthia Curry, senior counsel for the Department of General Services, said she first saw the final $95 million contract with Oracle at 5:30 p.m. on May 31, 2001 -- the day the deal was signed and approved by the Davis administration.

Although Curry went above her boss, General Services director Barry Keene, to complain about the Oracle contract, she got no response. Keene, Curry testified, told her not to make waves about a contract she thought was flawed.

"He said, 'Don't quash it.' Well, I don't think he used the word 'quash,' " Curry told a legislative committee, "but in other words, 'Don't make this deal go away.' "

Lawmakers are dissecting a recent report by the state auditor that gave a withering portrayal of the Oracle contract and how it came about. The audit has led to a shakeup within the Davis administration and a criminal investigation by Attorney General Bill Lockyer.

In her testimony, Curry said she thought Keene and Department of Information Technology Director Elias Cortez were calling the shots on the contract. She said that in her conversation with Keene, he mentioned Gov. Gray Davis' main technology adviser, Arun Baheti, as also pushing the deal.

"It does appear there was some higher authority calling the shots here," state Sen. Jackie Speier, D-Hillsborough, commented during the Joint Legislative Audit Committee hearing.

"That is certainly the impression I had on May 31st," Curry replied, adding later: "I really had not seen a contract that had so many people pushing at a higher level of government."

Baheti resigned last week as Davis' director of e-government after admitting he met an Oracle lobbyist over drinks and accepted a $25,000 check for the governor's re-election campaign. The check was sent to the Davis campaign two weeks after the contract was signed.

The auditor contends taxpayers could end up spending between $6 million and $41 million more for database software than if there had been no contract with Oracle. The company disputes the findings, saying the auditor relied on outdated information about the need for software.

The contract, however, would commit the state to buying 270,000 Oracle software licenses, even though a state survey found only five out of 127 state agencies expressed interest in Oracle software. The auditor said about 50,000 software licenses would have been closer to the actual need.

STAFF RESIGNATIONS

Already, Keene and Baheti have resigned, and Cortez has been suspended with pay, which is $123,000 a year. Oracle and its financing partner, Logicon, now are working with the Davis administration to cancel the contract.

"I am determined to rescind this contract so the taxpayers don't have to pay one additional penny, and I'm confident we can do that," Davis told reporters Monday.

RUSHING AS A TOOL

Davis administration officials have admitted rushing the contract as a negotiating tool -- because Oracle needed to post the new revenue on its books before the end of its 2001 fiscal year on May 31.

In her testimony Monday, Curry said she was given a partial draft of the contract the day before it was signed but didn't fully review it because negotiators were continually sending her amendments via e-mail. The changes continued into the next day.

Later, when she saw the final contract at around 5:30 p.m., it was a mess, she said, with boilerplate language from other standard contracts, seven different parts covering financing and other details and sections that contradicted other sections.

"I went in and was basically angry," Curry testified about her meeting with Keene. "I said, 'Look, I've got this document and I don't have time to review it and it has the potential to cost millions and millions of dollars, and I don't think we should sign this.' "

WENT OVER BOSS' HEAD

Curry said she went above Keene's head, to a senior attorney in the state Consumer Services Agency, to report her complaints, but "he didn't report back. "

Curry said she then sat in Keene's office, waiting for upper-level officials in the Davis administration to sign a so-called Governor's Action Agenda that outlined the "proposal," which they did.

As she was sitting there, the governor's cabinet secretary, Susan Kennedy, called Keene to congratulate him on signing a long-term contract for software. Kennedy, Curry testified, called Keene's department a "can-do" agency.

"I didn't know why everybody was so excited about it," Curry said, "which kind of raised the hairs on the back of my neck."

Curry's testimony Monday was disputed by an upper-level Davis appointee. Aileen Adams, the director of the Consumer Services Agency, said she was "stunned" that Curry would imply her department knew about the contract's legal problems and did nothing about them.

Adams said the agency's lawyer told her significant legal issues were never discussed in their conversation. Curry's testimony about raising alarms above Keene's head "is just dead wrong," Adams said in an interview. "If they did have concerns, they did not relate them to me."

Adams said she was given faulty information by Cortez and Keene, who promised in the final hours that the contract had been fully analyzed. "It was a lie. It was all fabrications," said Adams.

OTHERS SAW PROBLEMS

Curry, however, wasn't the only Davis administration official who saw problems with the Oracle contract. Debbie Leibrock, an official in the Department of Finance, had raised alarms about the deal in a series of e-mails and phone conversations.

During negotiations, a high-level Department of Finance official, Betty Yee, had relayed the department's concerns about the Oracle contract to Kari Dohn, the governor's policy director. Yee said she got a "thank you" at the end of the conversation.

Dohn -- one of Davis' closest advisers -- testified that she never heard specific concerns from Yee and assumed Baheti was going to take care of any problems. Dohn said she was distracted by the energy crisis and did not see details about the Oracle contract.

Director of Finance Tim Gage, who remained skeptical about the deal, wrote an e-mail at the time saying he would rather not approve such a large contract with Oracle "on the fly," adding: "But we don't always set the rules."

CRITICAL TESTIMONY

Highlights of senior counsel Cynthia Curry's testimony before a legislative committee: .

-- On her reaction after seeing the contract: "I said, 'Look, I've got this document and I don't have time to review it and it has the potential to cost millions and millions of dollars, and I don't think we should sign this.' "

-- On pressure to approve the deal: "I really had not seen a contract that had so many people pushing at a higher level of government."

E-mail Robert Salladay at bsalladay@sfchronicle.com.

©2002 San Francisco Chronicle   Page A - 1  

 

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