Calif. official: "No clue" on Oracle problem

A state official who backed a $95 million contract with Oracle tells a legislative committee that she was completely unaware of any problems with the contract until months later.

Alorie Gilbert Staff Writer, CNET News.com
Alorie Gilbert
writes about software, spy chips and the high-tech workplace.
Alorie Gilbert
5 min read
SACRAMENTO, Calif.--A California state official who backed a $95 million contract with Oracle said Tuesday that she was completely unaware of any problems with the contract until months after it was signed.

"I had no clue," said Aileen Adams, the head of the State and Consumer Services Agency, who testified Tuesday before a legislative committee convened to investigate the controversial contract. Her testimony contradicted earlier witnesses who said they had raised red flags about the contract to state officials--including Adams--before it was signed. Adams denied knowing about any problems until earlier this year.

A public outcry followed an auditors report last month that said public officials failed to exercise due diligence in signing the six-year contract last May. The state paid at least $6 million more than it needed to for the database software, according to the auditor's report. Oracle maintains that the contract could save California as much as $163 million.

Adams was one of several officials who endorsed the contract in a document sent to the governor's office. She said Tuesday that she only became aware of state officials questioning the deal in February, months before the auditor's report.

"We gradually began to see that it may not be such a great deal for the state," Adams said about the February meetings. Despite saying repeatedly that she wished she had known about the problems and had talked to other departments, Adams defended her actions given the information she had at the time.

"(The contract) was always represented to me as a major step forward and a great deal for the state," Adams said.

A dustup over whether Dean Florez, committee chairman, would have to subpoena Oracle employees to appear was settled when the company agreed to allow five salesmen to testify in June. Oracle missed a deadline on Monday that Florez had set for agreeing to appear, saying the company needed more time and wanted a different employee to testify. Oracle capitulated Tuesday after the committee indicated it would approve the subpoenas.

Also testifying Tuesday was Susan Kennedy, the highest-ranking member of the governor's office reported to be aware of the Oracle contract. Gov. Gray Davis has said he was not aware of the contract at the time the state officials signed it.

Kennedy said she had no reason to question the document she received on May 31 from Adams and other officials, and never discussed the contract with Davis until after the auditor's report was released.

"I was looking at a document signed off by five agencies unanimously, with no caveats," Kennedy said. "It was not that extraordinary."

Kennedy said that her understanding of the contract was that it simply consolidated the Oracle licenses already purchased under one contract, the cost representing money the state would spend anyway on the assorted pre-existing license agreements.

"It appeared to be a change in IT policy of a very arcane nature," said Kennedy, explaining why she didn't brief Davis.

Adams testified earlier that she'd "be stunned if (Davis) knew about" the contract, which prompted Republican committee member Chuck Poochigian to respond: "I'd be stunned if he didn't."

"The fingers seem to be pointing everywhere except up" to the governor, said Republican committee member Bill Morrow.

Legislators said they also planned on Tuesday to call Barry Keene, who resigned as director of the Department of General Services after the controversy erupted. The hearings, which began several weeks ago, are scheduled to continue through June.

The committee has already heard several days of testimony in recent weeks. Janice King, a state employee who reported to Keene at the time the state signed the contract, testified last week that Keene was an "advocate" of the deal and insisted she move it forward despite her warnings that she was unsure of its merits.

According to previous testimony, Keene, a former state senator, and Elias Cortez, the former director of the Department of Information Technology, dismissed numerous complaints from state officials closest to the deal saying that they did not have the time nor the resources to fully evaluate the contract before a May 31, 2001, deadline mandated by Oracle. Davis suspended Cortez on May 2.

The eagerness to sign the deal, which took only about three weeks, and the lack of scrutiny by Cortez, Keene and their staffs, has mystified state lawmakers investigating the matter.

"They hurried this thing along like nobody cared what kind of deal we got," said Lynn Daucher, a state assembly member and a member of the legislative committee conducting the hearings. "I still have trouble understanding what the rush was. I don't buy that the deal would go away May 31. There's got to be something else going on, because it doesn't make sense."

Critics say high-pressure sales tactics used by Oracle and Logicon, Oracle's partner in negotiating the deal with the state, appear to have rendered state officials defenseless. During hearings last Tuesday, the committee presented an e-mail exchange between Oracle and Logicon dated several days before the contract was to expire.

In the e-mails, which Logicon turned over to the state, employees of the two companies discussed how much information to give Kim Heartley-Humphrey, the deputy director of acquisitions at the California Department of Information Technology, which coordinates major technology purchases for the state. At one point, a Logicon employee wrote in an e-mail that he planned to give her "the least amount of data possible. At this point giving too much information can only be a bad thing."

Cortez is expected to testify on Thursday, and Arun Baheti, the governor's former director of e-government, is scheduled to testify on Wednesday. Baheti resigned last month after revealing he accepted a $25,000 contribution from an Oracle lobbyist just weeks after the state signed the controversial contract last May. Davis returned the contribution to Oracle on May 9.

The committee has called on executives from Oracle and Logicon to testify next month.

Meanwhile, some state officials are lamenting the state's rush to cancel the contract, which sold the state more Oracle licenses than it had employees to use them. After all parties agreed to end the contract, talks continued between state and company officials regarding money that has already changed hands and about sales tax issues. According to a Logicon attorney, Koch has already paid $52.7 million to Logicon, which passed $35.5 million on to Oracle. Logicon also paid $3 million in sales tax.

But one state agency was hoping to use the new contract to shave $50,000 off an $8.4 million Internet project, according the Kevin Terpstra, a spokesman for the Department of Information Technology. Under the terms of the contract, any state agency can purchase Oracle database licenses at a 50 percent discount. Terpstra refused to name the agency.

"A lot of people don't really know if the Oracle contract is a good thing or a bad thing," Terpstra said.