California County Sues Deloitte For Fraud In SAP ERP Project

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.

According to a 38-page court document filed on Friday, the case stems from a 2004 decision by the County of Marin to replace its aging and fragmented financial management, payroll, and human resources systems an Enterprise Resource Planning, (ERP), system and contacted Deloitte.

The County alleged that Deloitte claimed to have assembled a team with ’deep SAP and public sector knowledge,’ but instead knew at the time it did not have the skilled resources to do the County’s SAP implementation.

The County in April 2005 hired Deloitte to implement its SAP ERP system. However, the County alleged in the court document, ’rather than providing the County with SAP and public sector expertise, Deloitte used the County’s SAP project as a trial-and-error training ground to teach its consultants -- many of them neophytes -- about SAP for Public Sector software, all at the county’s expense.’

The County also alleged that, after two years of working on the SAP ERP implementation, Deloitte collected over $11 million in fees even though it knew that the SAP system would not meet the County’s requirements.

The County also alleged that it has spent over $30 million in connection with the Deloitte’s SAP implementation, continues to incur significant costs related to the project, and is exposed to potential liability from third parties ’adversely impacted by the SAP system’s failure to perform.’

The County of Marin was not able to provide further information at the time this story was published.

Next: Deloitte Responds To The Lawsuit

Deloitte, in a statement, said it is unfortunate that the county has decided to file the lawsuit.

’As stated previously, we fulfilled each and every one of our obligations under the contract, as evidenced three years ago when all of our work was approved by the County officials responsible for the project. To be clear, the SAP software was working properly when we completed our work in November 2007. Not only is the complaint without merit, but we are filing our own claim against the County for breach of agreement and unpaid invoices. Although we are confident that we will prevail in court, it remains our belief that this dispute can and should be resolved in a more logical fashion that benefits the County and its taxpayers,’ the company said in the statement.

In Deloitte’s claim, filed with the Marin County Board of Supervisors, the company said 13 consultants working with SAP, Oracle, PeopleSoft, and other software vendors submitted bids for the County’s ERP implementation, and that Deloitte’s bid was one of four which were based on SAP.

In December 2004, a committee consisting of County personnel received demonstrations of the skills and services of each consultant interested in the project.

’Based on its independent analysis, the County committee, over dissent from Committee members who preferred a different software provider, chose SAP to provide the ERP software for the system upgrade. The County subsequently selected Deloitte Consulting from the four SAP-teamed consultants,’ the company wrote in its claim.