IBM Lawsuit Closing Arguments

The six-week trial in the battling lawsuits between the state's Family and Social Services Administration and IBM over the failed welfare privatization initiative is coming to a close. There's been very little reporting of the trial to date, which will be decided by Marion Superior Court Judge David Dreyer. Media interest in the story waned after Gov. Mitch Daniels avoided having to testify at the trial after the Supreme Court ruled that he was immune from doing so under state law. The Fort Wayne Journal-Gazette's Niki Kelly offers some interesting comments made by opposing lawyers during closing arguments. Barnes & Thornburg's John Maley argued for the state:

“Were there breaches? Scores and scores and scores,” said John Maley, the state’s primary lawyer. “Needy Hoosiers were not being well served.”

Maley said IBM clearly did not meet its contractual obligations to Indiana and the state suffered substantial damages by having to create a new hybrid system.

“It’s time for IBM to finally be held accountable,” Maley said . . .

He said the company could have invested more in the project by hiring more workers to improve the metrics, but IBM executives were focused on profit.

“Shareholders trump a million needy Hoosiers,” Maley said.

If needy Hoosiers being well served was the motive, there would not have been a privatization initiative. See my bombshell report on Carl Moldthan's inside account of the welfare privatization debacle. It was all about Mitch Roob, FSSA's former secretary, steering hundreds of millions of dollars to his former employer, ACS. That Barnes & Thornburg was even permitted to represent the state's interests in this lawsuit is nothing short of an outrage. The law firm has long represented ACS and has very close ties to Roob and others who have worked for the firm, including the current FSSA secretary, Michael Gargano. IBM was merely a place holder to provide cover for the primary purpose behind the contract. Not surprisingly, ACS' financial role with FSSA grew substantially after IBM was dumped.

Kelley has an interesting e-mail exchange between Roob's replacement, Anne Murphy, and the agency's spokesman, Marcus Barlow, in explaining IBM's theory of the case.

Steve McCormick, attorney for IBM, argued further that the state intentionally looked for a way to terminate the contract to get out of paying additional dollars to convert the contract to a new hybrid system.

“This is not about IBM’s performance,” he said. “This is all about saving the state from having to pay.” 

“This was a wrenching, difficult transition,” he said. “Everybody understood there were going to be problems.”

He noted that the tenor of the state’s relationship with IBM changed in January 2009 when Anne Murphy took over as secretary of the Indiana Family and Social Services Administration. Within days, she fired off an email asking whether IBM might be in default.

McCormick also said a three-month corrective action plan was just a sham – a ruse to fire IBM when it was up in October 2009.

As proof, he showed an email between Murphy and then-department spokesman Marcus Barlow from the summer of 2009 where Murphy wanted Barlow to say negative things about IBM to the media. He warned it would be the first time to do so and said, “we just need to survive until October. Then we’re going to drop bombs ala Hiroshima and Nagasaki.”

McCormick said of the 22 corrective-action-plan items, all were improved except the four controlled by subcontractor ACS, whose liaison was working in Murphy’s executive office. He reiterated several witness statements that suggested ACS was purposely not trying to improve so IBM would get fired.

The state retained ACS in the hybrid system.

“They engineered that to happen and then come in here to use the failure of the (corrective action plan) against us,” he said. “They terminated this contract because of their budget problems.”

Marcus Barlow is a friend. I'll have to check to see if he comments on the nuclear option e-mail on his Facebook page today.