Newspaper article Evansville Courier & Press (2007-Current)

Ind. Loses $437M IBM Court Challenge ; State Still Owes $12.1M

Newspaper article Evansville Courier & Press (2007-Current)

Ind. Loses $437M IBM Court Challenge ; State Still Owes $12.1M

Article excerpt

INDIANAPOLIS - Indiana can't recover any of the $437 million it paid to IBM Corp. before firing the company that was leading the state's much-critized effort to modernize its welfare delivery system, a judge ruled Wednesday. Instead, the state owes IBM $12.1 million more for equipment it kept, on top of $40 million in subcontracting fees it already owed the technology giant, Marion Superior Judge David Dreyer ruled in a decision that criticized both parties.

"Neither party deserves to win this case," Dreyer wrote in the first paragraph of his 65-page ruling. "This story represents a 'perfect storm' of misguided government policy and overzealous corporate ambition. Overall, both parties are to blame, and Indiana's taxpayers are left as apparent losers."

Indiana hired IBM in 2006 in a 10-year, $1.37 billion deal to lead the transition away from a paper-based method of processing Medicaid and food stamps applications at the county level to a statewide system with a call center and online document processing.

Less than three years into the transition, Gov. Mitch Daniels fired the company after a series of complaints of errors, long delays and a lack of human contact. Indiana kept IBM's subcontractors, and the Family and Social Services Administration started launching a "hybrid" version.

Meanwhile, Indiana and IBM feuded. The two sides squared off in a six-week trial earlier this year, as Indiana demanded the money back it had paid IBM, and IBM said Indiana owed it another $100 million.

IBM officials lauded Wednesday's decision.

"This case was all about whether the state would fulfill its clear and explicit contractual promises," said Robert Weber, IBM senior vice president and general counsel.

"The court's decision is an important one for all companies who do business with the state because it makes clear that the state is not above the law."

Gov. Mitch Daniels immediately signaled that Indiana will appeal the ruling, and said regardless, the savings Indiana has realized as a result of the effort are much greater than what Indiana stands to lose in the lawsuit. …

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