State attorney says Oracle contract looked dubious

By Jennifer Coleman The Associated Press
Tuesday May 07, 2002

SACRAMENTO — A lawyer for the state Department of General Services testified Monday that she had grave concerns about a $95 million software contract with Oracle Corp. that she first saw the day it was signed. 

The Joint Legislative Audit Committee hearings led by Assemblyman Dean Florez, D-Shafter, examined the state’s six-year, $95 million, no-bid contract to buy and administer database management software from Oracle. 

A state auditor’s report criticized the contract, saying it could waste as much as $41 million — not save $111 million as Oracle claimed. 

In addition, there was pressure to complete the deal by the end of Oracle’s fiscal year on May 31, 2001, said Cynthia Curry, a senior staff counsel for the Department of General Services, one of three state agencies that signed off on the contract. 

Several top aides to Gov. Gray Davis were slated to testify Monday about how the botched deal was reviewed before it was signed, and whether the governor was told about it. Among them was Elias Cortez, the state technology chief suspended last week. 

The deal was one of “literally hundreds of transactions” the state makes each month without his approval, Davis said Monday. “So this is one of scores of those transactions that take place without my knowledge.” 

The hearings come as the state’s finance director began talks with Oracle Corp. to discuss killing the contract. 

Finance Director Tim Gage will meet soon with Oracle executives to negotiate an end to the state’s contract, said Steve Maviglio, press secretary for Gov. Gray Davis. The talks could take up to two weeks. 

“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 said. 

A legal adviser to the General Services Department, one of the three state agencies to approve the contract, Curry said she first saw it at 5:30 p.m. on May 30, 2001, the day it was signed. 

“There was no way I could review that contract in any manner of time to advise DGS,” said Curry. “It was just not a good document for the state to move forward on.” 

The contract was “cut and pasted” from other documents, with conflicting language, Curry said. 

Sen. Richard Alarcon, D-San Fernando, asked Curry why she hadn’t called the governor to stop the contract if she had concerns. 

“If my job is to throw myself in front of the director’s pen and stop this ... I don’t think I’m in the position to stop people appointed by the governor from doing what they think is their jobs,” Curry said. 

Republican critics have suggested the contract is at least an example of incompetence by the Davis administration and that it may also involve corruption. 

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. 

The governor’s office has a written policy against administration officials accepting campaign donations. Baheti has since resigned, as did DGS chief Barry Keene, who signed the contract. 

Curry testified that she had to ask Mehta to leave a meeting between state officials and Oracle in July, as the parties worked to amend some terms of the contract. 

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, State Auditor Elaine Howle said. 

Oracle has disputed Howle’s report, saying she severely underestimated the state’s future database needs. 

The state Senate could vote this week 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.