Oracle Contract Flap With Calif. Heats Up

A highly criticized six-year, $95 million computer contract between Oracle and the state of California has expanded to almost Enron-Arthur Anderson proportions.

In an unprecedented move, the office of Governor Gray Davis Thursday asked state Highway Patrol officers to step in and prevent document shredding at the Department of Information Technology in Sacramento.

This after an April 17 state audit found the deal would end up costing state taxpayers $41 million instead of saving $16 million, which the Redwood Shores, Calif.-based software giant promised it would.

According to published reports, Davis’ legal adviser; Barry Goode received reports of “possible document shredding” at the agency.

“While we had no conclusive evidence that any shredding or destruction of documents occurred, the mere suggestion that it may have occurred has led us to take these steps,” Goode said in a statement.

Davis also suspended Department of Information Technology director Elias Cortez for the length of the investigation and said director of e-government, Arun Baheti, had resigned.

The consulting firm of Logicon, which is owned by Northrop Grumman , was hired to facilitate the deal along with Oracle and was poised to take in $28 million from the contract, the audit showed.

Logicon consultants forecast a savings of $111 million for California if they took the deal, but state auditors found that to be “wildly inaccurate.”

Meantime, Oracle executives have said they have no problem tearing up the deal and walking away.

“When our contract with the state of California first became an issue several months ago, we offered to rescind the deal,” said Oracle spokesman Jim Finn. “We stand by that offer today, however, we continue to believe that our contract delivers great value to the state.”

According to the audit, the three state departments named in the Oracle deal were still looking for way to pay for the software, and as of mid-March no state workers were using the Oracle database product.

The contract is being investigated by California Attorney General Bill Lockyer, which has become an issue itself since state Sen. Richard Ackerman called for Lockyer’s removal from the case since he received $50,000 in campaign contributions from Oracle in the last 18 months.

Lockyer’s office has denied any undue influence in investigating the deal.