SAN RAFAEL, Calif. (CN) – Deloitte Consulting fraudulently induced Marin County to pay it $11 million to set up a computerized financial management system, and not only bungled the work, but used it as “a trial-and-error training ground to teach its consultants – many of them neophytes – about the … software, all at the county’s expense,” Marin County says in a $30 million claim. The complaint comes as Deloitte is embroiled in an even bigger troubled contract with the California court system.
In its complaint in Marin County Court, the county claims that Deloitte “mounted an extensive sales campaign to be hired by the county,” (2) and represented itself as having the ability, skills and experience to implement countywide financial management software developed by SAP AG.
These representations were fraudulent, the county says, as Deloitte “knew that it did not have the ability or intention to provide the skilled resources necessary to deliver a successful SAP implementation to the county.”
Deloitte won the contract in 2005, and during the two years its consultants worked on two versions of the project, Deloitte collected more than $11 million, without delivering a usable product, the county says.
“(S)ome of the Deloitte consultants assigned to the project were so unfamiliar with the [software] that they had to attend the same SAP Academy ‘boot camp’ that the County Project team members attended,” the county claims.
“The result of Deloitte’s misconduct was a defectively designed, deficiently installed and poorly functioning SAP system that was incapable of performing the county’s financial, human resources and payroll functions,” the complaint states. “The county was saddled with a costly computer system far worse than the legacy systems it was intended to replace.”
To conceal that the software was not ready to go live, the county claims that Deloitte employed Marin County’s former project manager (nonparty) Ernie Culver “to obtain sham ‘sign-off’ documents purportedly approving work that Deloitte had not performed, not performed properly, or [that] had been rejected by other county employees,” the complaint states.
“Even after Mr. Culver was no longer the project manager, Deloitte continued to present him with the sham ‘sign-off’ documents in order to secure payment of its fees. Many of these documents not lonely lacked the requisite signatures, but were submitted to Mr. Culver just as the Release II go-live was occurring, when the extent of Deloitte’s misconduct was about to be revealed.”
Though the software was riddled with defects, which SAP experts said “were caused by the Deloitte consultants’ lack of requisite SAP skills and experience,” Deloitte released version 2 of the software in 2007 without resolving the problems with the first version, the county says.
“To date, nearly four years after the initial go-live of the SAP system that Deloitte designed and implemented, the county continues to struggle with ongoing performance problems, functionality limitations and crippling defects,” the complaint states.
The defective software overpays some county workers’ wages and benefits, underpays other, and fails to pay others at all, the county claims.
The complaint cites several other allegedly failed Deloitte software implementation projects, in Los Angeles, San Antonio and Miami.
In San Antonio, “media accounts referred to the Deloitte SAP implementation as a ‘nightmare,’ which ‘prevented the [police] force from receiving accurate paychecks,'” the complaint states. (Bracketed word as in complaint.)
It adds: “More recently, media reports have also described implementation problems at the Miami-Dade School district, which has fired Deloitte. One Miami-Dade official stated that paying Deloitte for its inexperienced and unskilled consultants was like ‘pouring money into a black hole.'”
Marin County demands $30 million and punitive damages for fraudulent inducement, negligent misrepresentation and breach of contract.
County Counsel Patrick Faulkner was unavailable for comment on Friday.
Deloitte also is embroiled in a controversial multimillion-dollar contract with the State of California’s judicial system.
Deloitte won that contract in 2003, to implement a statewide software system to manage cases and connect trial courts with each other and with law enforcement. The problem-plagued Court Case Management System has drawn criticism from trial judges who say it is unusable and too costly.
A spokesman for the judicial branch’s administrative arm said the Administrative Office of the Courts is aware of the pending litigation with Marin County.
“Deloitte actually told us about it,” he said. “This involves an entirely different system from ours. The only thing we have in common with Marin is that we both use Deloitte’s consulting services.”