Thread:
Here's the full text of the FoxMeyer suit article in WSJ (Now go subscribe....<g>). Coupled with the DAX selloff, it will probably be a down day (understatement?). Note: Foxmeyer has been suing more than SAP. Andersen Consulting for example.
SAP Is Sued by FoxMeyer Trustee;
$500 Million Suit Alleges Negligence
By MATTHEW ROSE and ELIZABETH MACDONALD
Staff Reporters of THE WALL STREET JOURNAL
The bankruptcy trustee for FoxMeyer Corp. sued German software giant SAP AG for $500 million, alleging SAP's software helped to hasten the drug distributor's collapse.
In a separate action, the Chapter 7 trustee, Bart A. Brown Jr., sued
FoxMeyer's former auditor, Deloitte & Touche LLP, for failing to stop a $750 million refinancing that allegedly harmed FoxMeyer. That suit, filed in a New York federal court, seeks $500 million in compensatory and unspecified punitive damages, as well as legal fees.
Deloitte & Touche said in a statement: "There is no basis for these
allegations, which mischaracterize the nature of Deloitte & Touche's services. Our services were performed in accordance with applicable professional standards, and we will vigorously contest this case."
The trustee's suit against SAP, which was filed in federal court in Wilmington, Del., on Monday accuses SAP and its U.S. subsidiary of fraud, negligence and breach of contract, among other allegations. The suit also seeks the $500 million for compensatory and unspecified punitive damages, as well as legal fees.
"This action is without merit and at odds with the facts," said Eric Rubino, senior vice president and general counsel for SAP America Inc. "The company met all of its contractual obligations and plans to vigorously defend against the claims," he added.
The suits are the latest in a series of legal actions taken by FoxMeyer's bankruptcy trustee. In early July, the trustee sued consulting giant Andersen Consulting, the firm that helped to implement SAP's software, also for $500 million.
FoxMeyer, based in Carrollton, Texas, at one time had annual revenue of about $5 billion. It filed for protection against creditors under Chapter 11 of the Bankruptcy Code in August 1996; that action was reclassified as a Chapter 7
Specifically, the suit against SAP alleges that, in the summer of 1993, FoxMeyer entered into an agreement to buy SAP's R/3 software system.
Under the agreement, the R/3 program, which knits together all corporate operations into one integrated system, would connect all of FoxMeyer's operations at its warehouses. R/3 historically has been used to help run manufacturing operations, rather than distribution companies such as FoxMeyer.
But in late 1994, the suit says, SAP informed FoxMeyer that the program could process invoices at only six of its 23 warehouses. Moreover, the new system could handle no more than 10,000 customer orders a night, compared with 420,000 under FoxMeyer's old system.
Mr. Brown, the trustee who is being represented by the New York firm
Kaowitz, Benson, Torres & Friedman, said the system ultimately cost more than $36 million, of which more than $5 million was in software fees.
In recent years, companies have been spending millions of dollars on
complex enterprise software, one of the hottest tech sectors around. SAP's product, R/3, is by far the industry leader, and has helped push the $70 billion SAP to annual sales growth rates of more than 60%. |
