Lawmaker: "Influence" drove Oracle deal

Stopping short of accusing Logicon or Oracle of illegal conduct, California lawmakers insist that Logicon exerted political influence to cement a statewide software deal.

John Borland Staff Writer, CNET News.com
John Borland
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John Borland
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SACRAMENTO, Calif.--Two months, 30 witnesses and 2,500 pages of documents after California lawmakers began investigating Oracle's controversial $95 million contract with the state, no clear answers have emerged.

But after a final grueling day of testimony, interviewing Oracle reseller Logicon about its role in the controversial deal, lawmakers closed their investigation with deep criticism of almost everyone involved: Oracle, its lobbyists, the reseller that brokered the deal, and the state employees who signed it.

"I think we got taken to the cleaners," said Assemblyman Dean Florez, the chairman of the Joint Legislative Audit Committee, which is conducting the hearings, in closing remarks. "If we have accomplished anything, I hope it is to warn state officials that the next time a smelly deal crosses your desk at the 11th hour, you'd better do what's right instead of what's politically expedient."

Florez said he would close his committee's investigation without a report, although scrutiny of the deal would continue under the auspices of the state attorney general's office. The public had already been treated to ample evidence of a contract grounded in political influence and smoothed by Capitol relationships, he said.

The final day's testimony focused on the actions of Logicon executives Guy Speers, Rajan Mittu and Greg Thomas. In sessions that went hours without a break, Speers defended the statewide software contract, saying that California officials who wish to cancel the deal "don't get it."

"The contract that California ended up negotiating is as good or better than anything I've seen," Speers said. He blamed the controversy on the complicated contract process itself, as well as on the abbreviated review that state officials gave the proposal.

State officials admit that they didn't scrutinize the deal as much as they could have, and they didn't necessarily question Oracle's promises of cost savings and estimates for the number of business licenses that the state would need.

"In hindsight, it would have been better to slow the process down and get buy-in from legislators and some of the agencies," Speers said. "I think if we had done that, we wouldn't be here today."

The investigation is the result of a scathing state auditor's report in April that estimated it would cost California $41 million to use Oracle's software--rather than save the state $100 million during the 10-year contract, as Oracle contends.

Florez said he spearheaded the inquiry to cast "sunlight" on the process of how the no-bid deal came together, hopefully to prevent similar mistakes on future contracts. The committee will also turn over documents received through the investigation to the state attorney general's office--which is conducting a criminal and civil investigation--as well as to any other relevant state and federal agencies.

California's $95 million contract has not only raised eyebrows because of the way it was executed, but also has resulted in Gov. Gray Davis proposing several changes to the state's contracting process. The contract has also prompted the resignations of four state officials.

The deal has put a bright spotlight on Ravi Mehta, an Oracle lobbyist who had looked to use campaign contributions as a means to woo political favors. The controversy has touched local politicians and even Davis, who received a $25,000 campaign contribution from Oracle several days after the contract was signed. The governor, who is up for re-election in November, has returned the contribution.

But contradictory testimony throughout the trial has failed to provide an accurate picture of how the deal was finalized or structured. It's also unclear whether Oracle or Logicon is to blame for the convoluted contract--or whether state officials were too trusting of the promised cost savings and license estimates in the first place.

In previous testimony, Oracle sales executives and managers said Herndon, Va.-based reseller Logicon approached California about using a statewide enterprise licensing agreement. Oracle's sales representatives said California had historically purchased its software through resellers, and, as a result, Oracle had never considered selling a statewide license to the state. Oracle representatives initially doubted that Logicon could seal the $95 million contract.

But Logicon quickly immersed itself in the deal, learning the key contacts it would need in Sacramento political circles. Logicon resellers also got help from Richard Polanco Jr., an Oracle salesman to the education market. Polanco Jr. voluntarily introduced Logicon resellers to his father, Sen. Richard Polanco, and Assemblyman Marco Firebaugh.

But toward the last few weeks of the negotiations, Oracle seemed to edge out Logicon. The directors of the state's General Services and Information Technology departments--two of six agencies that needed to sign off on the project--said Oracle should serve as the prime contract and that Logicon should be the subcontractor.

State officials testified that they started leaning toward Oracle to cut out Logicon as a middleman and save the state money. But Oracle officials testified recently that state officials never intended to lower the price of the contract; they merely intended to change which company was listed as the lead contractor.

It's also unclear whether the prospect of cash campaign contributions caused state legislators to consider changes to the contract. Oracle lobbyist Mehta recommended in a January e-mail to Robert Hoffman, director of legislative affairs at the company, that contributions be made "to a number of individuals who are presently in office or running in safe seats and will be elected to the California legislature next year."

The legislative audit committee released the e-mail last week, but most of the politicians named in the list said they never received any money from Oracle.

Oracle executives have said they all but ignored Mehta's recommendations that the company contribute to political campaigns. Logicon executives said Monday that they, too, ignored Mehta's attempts to influence politicians.

"Mr. Mehta had been pursuing me for some time for a consulting contract," Speers said during testimony. "I had programmed his number into my cell phone so I could see he was calling and not take it."

In his final summation of lessons learned from the process, Florez said virtually everyone involved shared blame for the contract's failings. Political and monetary influence had played too much of a role in the process, and government officials had been slipshod in their scrutiny of figures provided to them by Oracle and Logicon.

"No one in this administration crunched Logicon's numbers to see if the deal made sense before they signed on the dotted line," Florez lamented. "It would almost be funny--if it wasn't so pathetic."

News.com's Dawn Kawamoto and Rachel Konrad contributed to this report.