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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 more than six years ago.

Marin County officials announced Wednesday that a $3.9 million settlement had been reached in two cases accusing a technical consulting firm 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 against Deloitte Consulting LLP 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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Bob Ratto January 11, 2013 at 03:12 AM
Your tax dollars at work #30MM...Spend $30MM on a computer system which really doesn't work. Sue the company you contracted with, get most of it thrown out of court, spend $5MM+ on legal fees, get back under $4MM. Money out $35MM, money in $4MM..continue on...
Mark Schoenbaum January 11, 2013 at 03:23 AM
And those responsible get golden pensions and lifetime family medical.
Tina McMillan January 11, 2013 at 07:42 PM
The lawsuit was an attempt to misdirect public attention away from the source and lay blame on the consultants rather than take responsibility for their own mistakes. During the time when SAP was costing tax payers millions our Supervisors were working on Marin Energy Authority and SMART. If we had timeline of their activities we would see how little attention is paid to day to day functioning of the county. Joe Nation spent years arguing that we had unfunded pension liabilities that had to be addressed. Supervisors put on their blinders and ignored the real chores of running the county. We need folks at the top that care more about county services, maintaining roads, and finding a system that retirement costs manageable. This issue is but one of many red flags that have been waving for decades. When Kinsey ran for reelection last fall no one bothered to ask about his contributions to the purchase of the old Post Office building in SF to move MTC to a new location. Senator DeSaulnier filed suit against Kinsey and other MTC officials. He tried to create legislation that would monitor their activities. This meant nothing to constituents at the ballot box because no one is watching the store. When asked directly about MTC Kinsey said he didn't have that hat on. Look at all the boards supervisors serve on especially regional agencies. Then follow the money and the red flags...
janna nikkola January 11, 2013 at 11:34 PM
The lack of accountability in the County of Marin offices (and most other civil services jobs as well) is mind-boggling. Is it because no matter how badly they screw up, nothing happens. No one loses his job or his pension. In the private sector, any individual who hired a consultant and had the firm paid $11 million for their services and then the computer system they'd recommended did not work would lose his head and might even be sued for damages. Some of these civil service employees behave like children since there are no consequence for their irresponsible actions. Interesting that even though the legal case went nowhere, the lawyers still got their $5.1 million fee for doing what? Is the County unaware of contingency legal fees where the lawyers only get paid IF they are successful?

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