Marin County claims racketeering against Deloitte and SAP, part one

Marin County claims racketeering against Deloitte and SAP, part one

Summary: Marin County's ongoing lawsuit against Deloitte Consulting and SAP represents a milestone in the analysis and history of IT project failures.

SHARE:
TOPICS: CXO, Legal, SAP
18

Marin County's ongoing lawsuit against Deloitte Consulting and SAP is important in the history of IT project failures. By raising serious allegations, the case highlights issues of fundamental significance regarding responsibility and accountability on enterprise software projects.

This post is part one of a series seeking to understand implications of Marin County's lawsuit on the enterprise software ecosystem.

Marin County bought SAP software in 2005 and engaged Deloitte Consulting to perform the implementation; after spending almost $30 million dollars, the county abandoned the effort, citing problems and deficiencies, and initiated a fraud lawsuit against Deloitte.

Related Marin County sues Deloitte: Alleges fraud on SAP project Understanding Marin County's $30 million ERP failure Marin County abandons $30 million ERP failure

In a later legal filing (PDF download), Marin expanded the lawsuit to include SAP and invoked the Racketeer Influenced and Corrupt Organizations Act (RICO), claiming that Deloitte and SAP jointly engaged in a "larger pattern" of fraudulent criminal activity. In addition, the lawsuit claims a former Marin County employee, who served as project director and subsequently was hired by SAP, also participated in the RICO conspiracy.

Marin seeks to recover at least $30 million, which covers implementation costs, and an additional $90 million for treble damages based on the fraud claims.

Marin's RICO claims assert that SAP and Deloitte sold implementation services that both companies knew Deloitte could not deliver. The lawsuit identifies several high profile public sector SAP project failures, in which Deloitte provided implementation services, to demonstrate an ongoing pattern of deception:

The lawsuit states that Deloitte, in concert with SAP, misrepresented the consulting firm's capabilities to implement SAP for Public Sector successfully; the suit describes alleged misconduct at Marin:

[The criminal] enterprise misrepresented Deloitte's skills and experience in SAP for Public Sector software to obtain highly lucrative public sector implementation and licensing contracts; fraudulently concealed implementation problems that resulted from Deloitte's lack of skills, silenced an SAP employee who raised issues with Deloitte's deficient implementation work... cover[ed] up deficient implementation work, and obtain[ed] payment for work that was not properly performed (or not performed at all)....

Aside from legal filings (PDF download) responding to the allegations, Deloitte issued the following statement:

The county's latest complaint is a frivolous litigation tactic.  It is simply a recycling of their prior allegations against Deloitte Consulting, several of which were recently dismissed for a second time by the judge agreed upon by the parties. Deloitte Consulting denies these inflammatory and false charges and will continue to vigorously defend the case.

Although SAP would not comment on pending litigation, IDG news service reported SAP's legal response (PDF download):

[SAP's filing] argues that the vast majority of the factual conduct alleged in the Complaint does not involve SAP.

Although SAP's Public Services division sold the software to Marin County, it "is not alleged to have been defective or to have been misrepresented. Nor is SAP alleged to have been engaged to implement the software," it states. "The allegations sound like a claim for breach against Deloitte, as the County separately has alleged in another proceeding."

This case highlights the conflicting agendas, objectives, strengths, and weaknesses that drive IT projects to succeed or fail.

In part two of this series, we examine strategic implications for enterprise buyers, software vendors, and system integrators. Although many of the issues do not have simple or straightforward answers, project success depends on articulating reasonable compromises and expectations for all participants in the IT Devil's Triangle.

Part two looks beyond the legal issues to describe reasonable standards of behavior for the major parties involved in enterprise implementations.

Image from iStockphoto. Pointer to Marin legal filing from Bill Wood.

Topics: CXO, Legal, SAP

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

18 comments
Log in or register to join the discussion
  • Now let's dump $30 million on lawyers

    I see where Marin County has launched a $30 million Legal Development Project. I hope for the sake of their taxpayers that the legal project works out better than the software project.
    Robert Hahn
  • The Case Raises Many Questions

    Very intriguing case that for me raises many questions.<br><br>Regarding SAPs culpability. Did SAP actively promote to Marin County that Deloitte had deep expertise in county government operations and implementations? Or did Deloitte point to being a major partner (partner type and level, including certifications) and SAP confirm the relationship?<br><br>Supposing that SAP is not culpable, can Marin County pursue Deloitte on the same grounds?<br><br>Does the firm "Deloitte" have the requisite credentials, but did the company field an inadequately experienced team on the Marin County implementation? <br><br>Can the county prove their charges, especially with respect to simplistic testing vs. realistic scenarios, and the team's expertise?
    elizab
  • Message has been deleted.

    dahowlett
  • RE: Marin County claims racketeering against Deloitte and SAP, part one

    Sue those companies into dust, they are nothing but major corporate mafia types.
    james347
  • RE: Marin County claims racketeering against Deloitte and SAP, part one

    So, according to Marin County, incopitance=racketeering.

    FTH
    fromthehip
  • Suprised there isn't more

    I worked on a 30 million project that ballooned to over 100 million and they never delivered what they sold (Deloitte). The project is now over 200 million. Early on, fraud was obvious but nothing was done...I won't bother to go into details. When I rolled off the project, I was shocked they wouldn't be sued. Glad to see someone is holding them accountable.
    chronos27
    • RE: Marin County claims racketeering against Deloitte and SAP, part one

      @chronos27 Be careful when you use the term "fraud," which has a legal meaning. However, fraud or not, many failed situations look "wrong" in just the way you described.
      mkrigsman@...
  • does ownership come into play

    As an outside observer, not knowing the ins-and-outs of the specific issue, I'm concerned with project ownership. Michael has touched on this in previous postings. Also, having worked for a state previously, I can see how ownership has bearing on implementation. Where I worked, there was a sense of 'if it fails, it's not a big deal, I won?t loose my job because I'm protected'. At private/public firms, if you screw this up, you loose your job. So, this being said, I'm also interested that Marin County is using (4) other public groups as examples.

    My question to Michael: Is there a higher failure rate among city, county, state and federal groups compared to private/public companies? And if so, is there a correlation to made?
    io619
    • RE: Marin County claims racketeering against Deloitte and SAP, part one

      @io619 I don't have specific stats about differences in failure rates between public and private companies, but it is a great question. Will keep my eye out for that research.

      Regarding ownership, I think the issue is the level of shared responsibility between customer and SI on a project such as this.

      Clearly, it is unrealistic and misguided for a customer to place full responsibility on the external vendor. However, it is also true that the vendor has an obligation to provide guidance and qualified resources.

      These are difficult questions with no easy answers. Look for upcoming posts to address these points.
      mkrigsman@...
  • RE: Marin County claims racketeering against Deloitte and SAP, part one

    Think about this.

    Marin county hired an outside firm since they had NO experience in SAP and NO one that could take on this project.

    If you have no ability on your own before a project starts and require outside people to come in and build it then you now expect to have ability to actually USE the product and then maintain and modify the system when those people leave afterwards?

    They also went with a monolithic all encompanssing project (from reading past articles) and then EXPANDED it even more and - as governmetns do - all the rules and regulations changes which affects everything in a contstant motion - results in NOTHING ever being completed.

    Since EVERY county / city is totally unique in laws, the WHOLE system has to be customized / modified to fit their unique situation - which ALWAYS results in errors, cost overruns, changes of scope to account for that - and that in turn requires a rewrite / mod of a contract since when you start no one EVER knows all what is involved since NOTHING is ever well documented in government - it takes 3 times as long to document and KEEP IT UP than it does to implement anything. And as all programmers - or even regular people know - documenting anything is the very last thing that is done if at all.

    Course almost EVERYONE waits until it is done to document since if you started at the beginning you would be CONSTANTLY going back to update all docs each and every time something changes - so you end up rewriting the same area 5 to 15 times - which itself is a waste of time. Thus you wait to the end and when the project is "finished" the first thing that happens is everyone is off the project and thrown onto another so nothing gets documented!

    This has been going on since they invented programming.

    Marin County is just trying to "CYA" for their own failure to transfer blame - "it's never MY fault" - mentality that is fairly common in the USA now.
    TAPhilo
    • RE: Marin County claims racketeering against Deloitte and SAP, part one

      @TAPhilo You raise valuable points. Marin completely denies responsibility, which is unrealistic and problematic.

      Part two of this series looks at customer responsibilities in the context of a shared relationship with the integrator.
      mkrigsman@...
  • RE: Marin County claims racketeering against Deloitte and SAP, part one

    This has to be a really lucrative deal for lawyers!
    tom@...
  • RE: Marin County claims racketeering against Deloitte and SAP, part one

    Deloitte, Anderson Consulting and all the big ones are nothing more than fraud, as an independent consultant, I have worked with them, most of their employees are fresh out of college, big talk and no knowledge, have you noticed how from time to time they change their names?
    rafaelros@...
  • RE: Marin County claims racketeering against Deloitte and SAP, part one

    Where they are going to excel in this case is when they show a pattern of failed implementations with the same players.
    I wouldn't be surprised to see this go to a class action in California, and I wouldn't be surprised if they then removed the case to federal court.
    brichter
  • RE: Marin County claims racketeering against Deloitte and SAP, part one

    Deloitte covers its tracks very well. At every stage of the project they get sign off of clients calling it "stage gate exit". Basically meaning, "if you sue us we have proof you owned responsibility". Not easy for Marin county to prove anything. Quality delivered by Deloitte and other Big 4 is only marginally better than those delivered by Indian outsources. It is like buying a shirt for $500 on ebay without being shown the photo and seller making you sign a fine print that you own responsibility if it does not fit you; and for the price you pay you expect and assume due diligence from seller; and you receive a shirt that barely fits your 10 year old son. Who is to blame?
    deveshs
    • RE: Marin County claims racketeering against Deloitte and SAP, part one

      @deveshs Without commenting on which party is wrong or right in this case, Deloitte's defense includes a point similar to yours. Their response says that Marin signed off on interim deliverables and did not say there was a problem within the allowable time, which I think was sixty days.
      mkrigsman@...
  • RE: Marin County claims racketeering against Deloitte and SAP, part one

    This is from point of view of 30 years of work experience. <br>The commercial software is of poor quality and is not designed with end-users in mind. Instead of improving it, there was a campaign of lowering end-user expectations. There are more bad apples there and deployment of commercial software became racket. The underutilization and abandonment of expensive and useless software is rampant. Kudos for Marin County to take an action.
    aquasys
  • Cheap Highest Whoa

    welcome to Cheap [url=http://www.wowgoldgroup.com]wow gold[/url],[url=http://www.wowgoldgroup.com]buy wow gold[/url]
    googleus