While many people from companies such as Deloitte are incredibly talented, even those companies may have a few bad apples that can and sometimes do spoil the whole entire bushel. In this article, we explore such an occurrence.
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The Marin County California Lawsuit against Deloitte Consulting took an interesting turn. The initial complaint was filed in mid-2010 against Deloitte only for fraud in providing inept and incompetent consultants (for background, see my previous post SAP ERP Project Failure Lessons Learned and Mini Case Studies 1).
Not long ago, Marin County amended their complaint (a standard legal practice after the initial legal complaint is filed) and included several other failed Deloitte projects as examples of a common practice. Additionally, SAP AG and SAP Services were joined to the complaint as additional parties. The basis of SAP’s liability, as alleged in the complaint, is that SAP through its partnership with Deloitte knew or should have known of Deloitte’s fraud but continued to give them credibility. That modified complaint was filed on December 16, 2010.
The SAP software itself was still not alleged to be the problem.
The introductory statement of the complaint lays it out:
This action arises from defendants’ illegal and continuing scheme to defraud the County and other governmental entities while reaping tens of millions of dollars in ill-gotten gains in connection with the implementation of enterprise resource planning (“ERP”) software known as SAP for Public Sector, licensed by the German software developer SAP AG. As part of this scheme, Deloitte, with the knowledge and assistance of the SAP Defendants, targeted the County by misrepresenting its skills and experience in SAP for Public Sector software to obtain a highly lucrative public sector implementation contract for itself, and licensing, maintenance and support contracts for SAP Public Services, Inc.
As a further part of the scheme, Deloitte falsely represented to the County – which had no ERP or SAP for Public Sector experience – that Deloitte had the requisite skills and experience in SAP for Public Sector software to deliver a successful implementation for the County. Deloitte and the SAP Defendants also falsely represented that Deloitte, by virtue of its “alliance” with the SAP Defendants, was uniquely qualified to properly implement SAP for Public Sector software. These representations were false because, at the time they were made, Deloitte and the SAP Defendants knew, or were reckless in not knowing, that Deloitte in fact lacked the ability and/or the intention to provide the County with appropriately skilled consultants.
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As a further part of the scheme, to conceal implementation problems that resulted from Deloitte’s lack of skills, Deloitte and the SAP Defendants engaged in unlawful conduct to ensure that the County proceeded to go live with the SAP system on the scheduled go-live dates, in order to secure payment of their fees. Such misconduct included deliberate under-testing of the SAP system by Deloitte to obtain artificially positive results and thereby conceal system defects; attempt by Deloitte and the SAP Defendants to silence an employee who raised issues with Deloitte’s deficient implementation work; and efforts by Deloitte and the SAP Defendants to corruptly influence defendant Culver, a County official who was also the County’s Project Director, to cover up Deloitte’s deficient implementation work, obtain payment for work that was not properly performed (or not performed at all) and cause the County to enter into additional contracts with Deloitte and SAP Public Services, Inc.
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The fraudulent scheme that Deloitte and the SAP Defendants perpetrated on the County is consistent with a pattern and practice of similar misconduct that they have perpetrated on other public entities, including those in Los Angeles, San Antonio, Colorado and Miami-Dade in connection with the implementation of SAP for Public Sector software.
On January 26, 2011, the case appears to have been removed to Federal District Court for Northern California from the Marin County Superior Court. On February 23, 2011, SAP filed motions to be dismissed as parties from the case, and to strike their name from the complaint. On March 21, 2011, the Motions to Dismiss and Strike were terminated because the parties all agreed for the complaint to be amended, and allowed for additional time to respond to the newly amended complaint once it was complete.
This case has a key and noteworthy item: the SAP software itself was still not alleged to be the problem. The allegations within the case surround the consulting practices of Deloitte, but SAP is “guilty by association” because they put their seal of approval on Deloitte as a qualified integrator.
Consulting Industry Implications – Especially for SAP Partner Programs
This case reminds me of something Michael Doane wrote about some time back– SAP system integrators need to be certified as well as their consultants (see Certainly Certifiable – SAP System Integrators Not Just Consultants).
After reading through the entire complaint, I believe that one or more of the consultants Deloitte brought to the project had partially or even completely fake resumes and SAP backgrounds. I would not be surprised if the number of fake or fraudulent consultants on that project was closer to 30% or even higher. I am not talking about the consultants being fake or fraudulent because they didn’t have public sector experience; I am talking about completely fraudulent work histories and experience in general.
I would also not be surprised if many of these consultants listed fake “certifications” on their resumes (for more background on the massive fraud around SAP consultants, please see Screening and Interview Methods to Find the Right SAP Consultant and the follow-up piece Screening and Interview Methods to Find the Right Consultant – Part 2).
Conclusion
Unfortunately, some ERP projects are subject to fraud. Regardless of what actually occurred, the claims made throughout the case illustrate an all-too-common phenomenon in the industry– one that companies need to keep a sharp eye out for.
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I have attached a copy of the entire case for anyone who is interested in reading this. Even if every allegation is not true, I have seen enough of these kinds of tactics to know that this type of thing happens routinely. Complaint document here.
In December of 2011, the case was updated and mostly dismissed: https://law.justia.com/cases/federal/district-courts/california/candce/3:2011cv00381/236529/123/. From a cursory search, no other updates have been made since.
