Calif. halts contract with Oracle
- By Matt Caterinicchia
- Jul 31, 2002
Following months of legislative hearings and high-level resignations over
a state audit report, California has terminated its licensing agreement
with Oracle Corp.
Oracle, state officials and reseller Northrop Grumman Corp. came to
terms to rescind the six-year, $95 million contract as well as relieve the
state of any further financial obligations, California Attorney General
Bill Lockyer said in a statement July 23.
The agreement calls for the companies to repay a $52.3 million loan
plus interest and fees that the state took out to pay for Oracle database
software as well as the first year of technical support.
"The money has already been wired to New York, and the deal is closed,"
said Gov. Gray Davis' legal affairs secretary, Barry Goode, at a news conference.
He added that the decision to rescind the contract does not shield the two
companies from potential criminal charges.
The contract had become a debacle for the governor in his campaign for
a second term. Davis received a $25,000 campaign donation from Oracle five
days after the contract was signed. Oracle officials and the governor denied
any link. Davis eventually returned the money.
A state audit revealed in April that the enterprise license agreement
would cost the state $41 million rather than save it $110 million, as Oracle
had promised. Critics said state officials never verified the cost savings
claimed by Oracle and Northrop Grumman.
Democratic Assemblyman Dean Florez, a critic of the contract who headed
the hearings as chairman of the Joint Legislative Audit Committee, said
in a statement that the rescission was a "welcomed resolution to a rotten
Florez called on Lockyer to pursue an investigation into whether there
was any criminal wrongdoing relating to the contract. "Yes, we got our money
back," Florez said in a statement. However, "individuals who may have broken
the law should be aggressively pursued and punished," he said.
The audit resulted in more than 100 hours of hearings by the audit committee
as well as an ongoing criminal investigation.