Posted by: kenwbudd | June 3, 2010

Marin County sues Deloitte: Alleges fraud on SAP project | ZDNet

Marin County sues Deloitte: Alleges fraud on SAP project

In a case that has the potential to reshape important aspects of the systems integration business, Marin County, California filed a complaint against Deloitte Consulting for its role in an over-budget SAP implementation. The lawsuit alleges that Deloitte committed fraud and “misrepresented its skills and experience.”

Here is an overview of the case:

Marin County on Friday filed a lawsuit against Deloitte Consulting alleging fraud related to an SAP ERP software implementation the county said is still not working four years after it initially went live.

In its lawsuit, filed Marin County Superior Court, the county is asking for actual and compensatory damages of at least $30 million, along with unspecified punitive and, or exemplary damages and interest.

Deloitte in turn filed a claim on Friday with the Marin County Board of Supervisors that the County owes it $444,171.50 for work completed, plus an additional late charge of $111,713.80.

This quote, directly from Marin County’s court filing, alleges fraud:

Deloitte mounted an extensive sales campaign to be hired by the County. As part of its sales efforts, Deloitte repeatedly represented to the County that Deloitte consultants had the requisite skills and experience to successfully implement a complex ERP software product specifically designed for public sector entities, developed and licensed by SAP AG and SAP America, Inc. (”SAP for Public Sector”). Deloitte further represented that for the County’s SAP implementation, Deloitte had assembled a team of its “best resources” who had “deep SAP and public sector knowledge.”

These representations were fraudulent.

The complaint emphasizes that the system integrator was aware of Marin County’s lack of skill, experience, and capability to manage a complex ERP implementation. In non-legal terms, the complaint suggests that Deloitte lied to Marin County in order to make the sale:

Indeed, at the time Deloitte made [the representations], it knew that it did not have the ability or intention to provide the skilled resources necessary to deliver a successful SAP implementation for the County. Deloitte also knew that because the County did not have any prior ERP implementation experience in general, or SAP experience in particular, it would be depending on Deloitte to oversee, guide and manage the project. Notwithstanding such knowledge, Deloitte made these false representations in order to obtain the contract for the County’s lucrative SAP project.

THE PROJECT FAILURES ANALYSIS

The lawsuit reads like a caricature of many IT ‘Devils Triangle’ problems I discuss in this blog, and lists a catalog of alleged IT services failures.

For example, the complaint states that Deloitte mishandled staffing, project management, risk management, and testing:

As part of its fraudulent performance of the contract, Deloitte: intentionally and/or recklessly failed to disclose to the County that Deloitte’s lack of SAP public sector skills resulted in a defective SAP system; withheld information about critical project risks; falsely represented to the County that the SAP system was ready to “go-live” as originally planned; conducted woefully inadequate testing; and concealed that it had failed to perform the necessary testing, thereby ensuring that system defects would remain hidden prior to the go-live.

According to the complaint, Deloitte failed to fulfill core system integrator responsibilities required on a project of this type.

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