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Technology Stocks : Oracle Corporation (ORCL) -- Ignore unavailable to you. Want to Upgrade?

To: MeDroogies who wrote (16900)	5/4/2002 11:38:26 PM
From: E_K_S	Read Replies (1) \| Respond to of 19080

It won't be easy, or cheap, to cancel deal RIPPLE EFFECT: Bank has already spent millions, likely to want money back Carrie Kirby, Chronicle Staff Writer Saturday, May 4, 2002 (http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/05/04/MN202397.DTL&type=business) -------------------------------------------------------- Undoing the state's deal to buy $95 million worth of Oracle software may not be easy. Although both sides say they are willing to walk away from the deal, labyrinthine financial maneuvers after Oracle's agreement with the state make it difficult to see who has California's money now and who is obligated to return it. "While we are prepared to unwind our involvement in the contract, there are multiple parties in this transaction who would also need to agree to unwind their involvement in the contract for the contract to be completely undone," Oracle spokesman Jim Finn said Friday in a prepared statement. Although California wasn't required to make its first payment until Sept. 1, a third-party lender has already paid out $52.7 million on the state's behalf. Here's what happened, according to the Department of General Services' audit of the transaction: -- Logicon, the Northrop Grumman subsidiary that arranged the deal, transferred its right to serve as the state's lender to another firm, Koch Financial in Scottsdale, Ariz. -- On Aug. 31, 2001, Koch agreed to pay Logicon $52.7 million on behalf of the state. -- Logicon in turn agreed to pay Oracle $36.5 million, keeping the remaining $16.2 million for itself. The Department of General Services believes that the amounts agreed upon have actually been paid, said Elaine M. Howle, the state auditor who issued the report exposing the deal. STATE OBLIGATION UNCLEAR "Koch Financial is likely to assert that the state is obligated to repay the loan," Howle wrote in her report. But the state auditor said it is not clear whether the state is legally obligated to pay Koch back. "Koch Financial acted in good faith, funded this loan and there may be a question of whether the state is on the hook for the $52 million to pay Koch Financial back," she said. "I'm sure the attorney general's office is looking into that." On Friday, Attorney General Bill Lockyer said he was looking into whether Logicon violated conflict-of-interest laws by consulting with the state on technology issues and working with Oracle on the software contract. Neither Koch Financial nor Logicon returned reporters calls Friday. REFUND UNCERTAIN Oracle's Finn does not yet know whether it would refund the money it has already been paid. "We haven't started any of these conversations," he said. When considering a refund, Oracle would have to take into account whether any state employees have used the software licenses so far. Oracle's database products enable offices to automate processes such as payroll. Logicon, which has its headquartered in Herndon, Va., specializes in helping governments select and install large software systems. In this deal, Logicon worked with the state, first as a reseller of Oracle software, and later as a financing agent. Logicon also agreed to support the state's software installations by providing a help desk as an Oracle subcontractor. To complicate matters even further, Koch may have already sold the right to collect on Oracle's debt to one or more other financial institutions. Corporate loans are often resold to syndicates of 10 or more investment banks.