Calif. governor to return Oracle money

Gov. Gray Davis' campaign committee said in a brief statement Thursday that he has decided to return the money, which Oracle had given to a member of his staff who was involved in negotiating the $95 million Oracle software deal. The funds were contributed to Davis' campaign just weeks after the deal was finalized.

"Governor Gray Davis has great respect for Oracle Corporation and its role in California's economy, but in view of recent developments he has directed his campaign committee to return the $25,000 contribution received from the company last June," Roger Salazar, press secretary for the Davis campaign, said in the statement.

Davis, who is running for re-election, has come under fire for his staff's role in signing the contract without thoroughly evaluating it. The state may have paid as much as $41 million more than necessary for the software, according to a state auditor report released last month. Redwood Shores, Calif.-based Oracle says the contract could save California as much as $163 million.

In a similar move this week, California Attorney General Bill Lockyer, who is investigating the matter, returned Oracle's $50,000 in campaign donations. Lockyer said in a statement that he wanted to erase any doubt about his interest in conducting a fair and thorough investigation that "involves allegations of wrongdoing at the highest levels of state government."

In the political fallout, three state officials have resigned or have been suspended, and state legislators have begun hearings on the issue. Monday, two state officials told a legislative panel that they tried to warn their superiors about the contract but were overruled.

Why officials overlooked those concerns remains a question. The panel is scheduled to hear testimony later this month from the state's former e-government director Arun Baheti, one of the officials who resigned. Baheti accepted the $25,000 contribution from an Oracle lobbyist in a barroom meeting just weeks after the state signed the controversial contract last May.

Oracle wrote the check in March of last year and pledged the donation in April at a political fund-raiser, Oracle spokeswoman Jennifer Glass said Friday. But the company held the check until its lobbyist in Sacramento, Ravi Mehta, met with Baheti in June. Glass said she did not know why.

The FBI is also looking into the case and is preparing to interview Baheti, according to a report Friday in the San Francisco Chronicle. A representative for the FBI's Sacramento office would not comment on the report.

Urged by lawmakers to conduct a federal investigation, U.S. Attorney John Vincent said this week that he was consulting with the FBI about the possibility of a probe.

Meanwhile, Oracle and its partner Logicon, which brokered the deal with the state, have offered to rescind the contract. Oracle executives met this week with Tim Gage, California's finance director, to discuss canceling the deal.

The state, however, must still pay Koch Financial, an Arizona-based company that financed the deal, said Sandy Harrison, a spokesman for Gage. Koch has already paid $52.7 million to Logicon, which passed $35.5 million on to Oracle. Koch refused to comment on the deal.