Calif. halts contract with Oracle

Following months of legislative hearings and high-level resignations over

a state audit report, California has terminated its licensing agreement

with Oracle Corp.

Oracle, state officials and reseller Northrop Grumman Corp. came to

terms to rescind the six-year, $95 million contract as well as relieve the

state of any further financial obligations, California Attorney General

Bill Lockyer said in a statement July 23.

The agreement calls for the companies to repay a $52.3 million loan

plus interest and fees that the state took out to pay for Oracle database

software as well as the first year of technical support.

"The money has already been wired to New York, and the deal is closed,"

said Gov. Gray Davis' legal affairs secretary, Barry Goode, at a news conference.

He added that the decision to rescind the contract does not shield the two

companies from potential criminal charges.

The contract had become a debacle for the governor in his campaign for

a second term. Davis received a $25,000 campaign donation from Oracle five

days after the contract was signed. Oracle officials and the governor denied

any link. Davis eventually returned the money.

A state audit revealed in April that the enterprise license agreement

would cost the state $41 million rather than save it $110 million, as Oracle

had promised. Critics said state officials never verified the cost savings

claimed by Oracle and Northrop Grumman.

Democratic Assemblyman Dean Florez, a critic of the contract who headed

the hearings as chairman of the Joint Legislative Audit Committee, said

in a statement that the rescission was a "welcomed resolution to a rotten

deal."

Florez called on Lockyer to pursue an investigation into whether there

was any criminal wrongdoing relating to the contract. "Yes, we got our money

back," Florez said in a statement. However, "individuals who may have broken

the law should be aggressively pursued and punished," he said.

The audit resulted in more than 100 hours of hearings by the audit committee

as well as an ongoing criminal investigation.