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Attorneys Give Opening Arguments In Indiana v. IBM Case

IBM Headquarters

Photo: Simon Grieg (Flickr)

IBM and the state of Indiana are in a suit after a contract was canceled with IBM to process welfare applications.

Attorneys for the state and for IBM will rely in part on the other side‘s internal memos and emails, as the trial in their contract lawsuit gets underway. IBM says Indiana has $100 million in unpaid bills from a two-year attempt to let IBM handle welfare and food-stamp eligibility determinations. The state says it is IBM that owes $223 million for not living up to its obligations under the contract.

IBM Attorney Steve McCormick acknowledges the company encountered problems with issues including telephone wait times and mishandled applications. But he says most of the contract‘s performance measurements hadn‘t kicked in yet, because the system wasn‘t fully in place yet — the state halted the rollout in mid-2008 to address problems that had arisen in the first 59 counties brought into the system.

McCormick says IBM got nearly straight A‘s from the state in a customer-satisfaction survey in October 2008 — he suggests the state went looking for an excuse to terminate the contract to save money in the middle of a budget crunch in 2009. “Everything they said, the governor‘s statements at the time the contract was terminated, the internal conversations, the internal communications, suggested that IBM did do the job,” he says.

The state‘s attorneys say state and federal officials began raising complaints about IBM’s performance as early as May 2008 and says IBM emails reveal the company had doubts even before the contract was signed, with managers warning that the company it did not have the qualifications for what Indiana wanted.

State Attorney Peter Rusthoven says the state is seeking $223 million in damages.

“Why do you think the federal government ordered a corrective action plan?” State Attorney Peter Rusthoven says. “Why do you think IBM agreed to a corrective action plan? I believe ‘corrective action‘ means there‘s something you need to correct, as opposed to, ‘Oh, it‘s all wonderful.’”

By February 2009, an email from an IBM Senior Vice President calls its performance “an abomination.” The state terminated the contract eight months later.


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