Mudslinging escalates in Oracle spat

The latest round of barbs follows a statement Oracle released Friday, characterizing an investigation by the Joint Legislative Audit Committee and its chairman, Assemblyman Dean Florez, as condemning the company without giving it a chance to defend itself.

That statement by Oracle Chief Financial Officer Jeff Henley drew a rebuttal Monday from Florez, who sent a letter to Oracle's chief executive, Larry Ellison, characterizing some of Henley's accusations as "utter nonsense" and "false." Oracle countered with a hastily called press conference to address Florez's letter, which in turn prompted a similar reaction from Florez to address Oracle's reply.

The increasingly snippy dialogue comes as Wall Street analysts say the controversy may be an additional drag on sales for Oracle and as Florez seeks a state senate seat in November.

In response to Henley's claim that state hearings were severely critical of the company, Florez said: "This charge is false. The hearings have focused on the failings in the bureaucracy and governor's office that led the state to sign the (enterprise license agreement). If anything, the hearings have been critical of the state officials who agreed to the ELA, not Oracle."

The legislator also disputed Henley's claim that Oracle has been denied an opportunity to explain the value of the deal. He noted that former California state auditor Kurt Sjoburg will be allowed to testify Wednesday on the merits of the deal. Oracle hired Sjoburg in January to draft an evaluation of the deal and to determine whether it would generate cost savings for the state, after a state senator sent a letter requesting a state audit of the deal.

In April, the state auditor released a scathing report on the $95 million, no-bid contract, saying it could cost California $41 million more than the state's existing contracts, rather than save millions of dollars, as Oracle maintains. The auditor's report also criticized the speed with which the deal was approved by the governor's office and other state agencies.

Oracle, meanwhile, challenged Florez's claims that the company was planning to offer only senior executive Kevin Fitzgerald to discuss Oracle's contract and to withhold five salesman whose testimony before the full committee the state had requested.

Ken Glueck, Oracle's vice president of government affairs, cited a May 20 letter sent to Florez, which stated that "this letter does not constitute a refusal by Oracle to submit these witnesses."

Oracle, Glueck said, wanted to offer both Fitzgerald and the five requested witnesses. "We expect a whole series of questions will be put to the (five) witnesses that they are not in a position to answer, since they do not deal with corporate matters," Glueck said.

Glueck said that the proposal to have Fitzgerald testify was only part of a negotiation process, to which Florez responded that the state does not negotiate when it asks for witnesses to testify.

After six weeks of hearings, Glueck expressed the company's frustration with its inability to testify before the committee and explain the value of the deal.

"It seems counter-intuitive to have six weeks of hearing and then...hold a hearing for the value discussion," Glueck said.

Florez said he wanted to wrap up the first segment of the hearings--understanding the process of how the contract was signed--before launching into the second, on whether the deal was actually good for the state.

"We believe that when we get around to discussing the value of the deal, it will be found that the state got a great deal," Glueck said.

Nonetheless, California and Oracle are currently trying to cancel the contract, for which the first payment is due in September. Assemblyman Roy Ashburn, R-Bakersfield, introduced a bill in May seeking to prevent the state from making any payments on the deal.

Further hearings were scheduled for Tuesday and Wednesday, with the state director of finance, state auditor and Sjoburg among those scheduled to testify this week. Oracle representatives are scheduled to appear next week.