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County Settles Tech Lawsuit for $3.9 Million

The county and Deloitte Consulting announced Wednesday that they settled litigation relating to the implementation of the county's computer system over six years ago.

County officials announced Wednesday a $3.9 million settlement regarding two cases accusing Deloitte Consulting LLP of racketeering and fraud during the implementation of the county's computer system over six years ago.

The settlement follows the court's dismissal of several of the county's claims since it was first filed in 2010. After an investigation, county officials decided to voluntarily dismiss the remaining allegations of fraud and improper influence of former county auditor Ernest Culver, who served as the project director for the implementation of the computer system.

The county received a $3,875,000 refund of Deloitte's $11 million fee. Deloitte is a U.S. subsidiary of global consulting firm Deloitte Touche Tohmatsu, and two U.S. subsidiaries of the German software developer SAP AG. The county already spent $5.1 million in legal fees and consulting for the case, according to the Marin Independent Journal.

"The settlement reduced the total fees paid to Deloitte Consulting and spares the taxpayers the continued expense of litigation," Sheila Lichtblau, the county's deputy counsel, said in a release.

The original complaint, filed in California Superior Court, alleged that the company defrauded the county of more than $20 million. The county alleged that during the time that Culver was interviewing with Deloitte and SAP about job opportunities, he was also approving Deloitte's deficient work on the computer system project, approving payments and encouraging Marin County to enter into new contracts with Deloitte and SAP Public Services.

The county also alleged that as part of the scheme, Deloitte falsely represented that it had the necessary skills to implement SAP for public sector software, and that the SAP entities falsely vouched for those skills.

When problems with Deloitte's work began to surface, the county accused Deloitte and the SAP entities of engaging in a cover-up that included bribing Culver to approve Deloitte's defective work, and silencing an SAP employee who attempted to intervene on the county's behalf.

The county was originally seeking $35 million in damages, to be trebled under the RICO statute, as well as punitive damages.

Now, the county "remains concerned about the activities of its former employee," but the current evidence "revealed that Deloitte Consulting did not improperly influence the employee. Accordingly, what remained was primarily a dispute about the scope of work that Deloitte Consulting was engaged to perform," Lichtblau said.

"It does not constitute an admission of wrongdoing by either party," she said. 

The county continues to use the computer system Deloitte Consulting helped to implement between 2005 and 2007, according to Lichtblau.

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Brant January 10, 2013 at 06:38 PM
Hmmm. Did I read that correctly? The County spent $5.1m in legal fees to obtain a $3.8m return? Sounds like our County! But now that the suit is behind us, "pending legal action" is no longer an excuse for keeping the details secret. This would be a great subject for investigation for next year's Grand Jury.
Kevin Moore January 11, 2013 at 12:39 AM
They lose money on every case, but they make it up on volume. Ahh-yiii-hii. Great idea on having a grand jury investigation. Someone posted on an IJ article a while back that this whole disaster was due to upper management listening to the sales reps and not getting the IT workers, who would support the software, involved with the project review.

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