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Oracle To Testify In Calif. Contract Flap

A handful of employees from Oracle and Northrop Grumman subsidiary Logicon will testify next month during a California Joint Legislative Audit Committee (JLAC) investigation, Internetnews.com has learned.

The five salesmen with the Redwood Shores, Calif.-based software giant and three from Herndon, VA-based Logicon will be questioned June 4 and 5 about their involvement in a highly criticized six-year, no-bid, $95 million computer contract between Oracle and the state.

The list includes including Richard Polanco, Jr., the son of state Sen. Richard Polanco, (D-Los Angeles).

California State Assemblyman Dean Florez (D-Bakersfield), who heads the JLAC, threatened to subpoena the employees Tuesday after Oracle failed to meet an imposed Monday, May 20 deadline to agree to question those closest with the contract negotiations. The JLAC voted to force the employees to testify, but an Oracle spokesperson late Tuesday said the company would agree to JLAC's terms and that a subpoena was unnecessary.

Oracle, which has volunteered to appear before the JLAC on several occasions, asked for an extension on Monday after the request was received on May 16 - one business day before the deadline.

"Beginning with Oracle's multiple offers to rescind the contract, we have cooperated every step of the way with all parties involved in reviewing the software agreement. We are pleased that, for the first time, the legislature has indicated a willingness to hear testimony on the central issue before them: the benefits of this agreement to California and its taxpayers. We look forward to a factual discussion with the committee," Oracle said in a statement.

The company's request to alternately send senior corporate spokesperson Kevin Fitzgerald was turned down by the JLAC. The employees will be available for questioning but not for testimony, an Oracle spokesperson said.

Oracle's central role in the California scandal has been a black eye for the company, which has been battling a soft market for corporate IT spending. Logicon, which helped barter the contract, was poised to take in $28 million from the deal.

An April 17 auditor's report claims the deal would end up costing state taxpayers $41 million instead of saving $16 million for the database software. Oracle still maintains that the contract could save California as much as $163 million.

California's Department of Finance, the Department of Information Technology and the Department of General Services signed off on the contract May 31, 2001, but the report said none of the departments had done an independent analysis of the project's savings estimates, but relied on numbers provided by Oracle and Logicon.

The contract has had a trickle-down effect on Oracle's position in the IT world. Gartner Dataquest confirmed last month that Oracle has slipped to No. 2 from its longstanding position atop the overall server market. According to the report, Oracle continues to lose market share to both IBM and Microsoft .

The investigation has even sparked change in the way the state will conduct future business with tech companies. Governor Gray Davis Monday issued a mandate that all future contracts of $100,000 or more be subject to competitive bidding until new rules are established.

"These actions will put an end to large sole-source contracts by the state until we establish tough regulations that promote competitive bidding," Davis said in a statement. "I am determined to ensure that taxpayers get their money's worth and that all state contracts withstand scrutiny."

Davis' chief deputy finance director, Annette Porini was also named Monday to head a three-member panel. The group is expected to review California's contract procedures and come up with new regulations within 90 days.

The scandal has even rocked the foundation of lobbying between tech companies and lawmakers.

Both Davis and State Attorney General Bill Lockyer returned campaign donations from Oracle after news that the contract was under scrutiny and that both men had received a combined amount of $75,000 in contributions.