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Marin County Adds ‘Racketeering’ to the List of Allegations Against Deloitte

Hell hath no fury like an obscure California county that feels completely gypped (to the point that they feel it’s fraudulent) by the largest professional services on Earth.

Marin officials fired another salvo in an escalating $105 million legal war with international computer consultants, filing a new lawsuit Thursday accusing them and a former county official of violating racketeering law in a bid to rip off taxpayers.

The new suit was filed against Deloitte Consultant LLP, software developer SAP and former assistant auditor-controller Ernest Culver, who served as project director of the county’s troubled computer installation before quitting to join SAP.

As you may recall, Marin County’s original suit against Deloitte for $35 million involved allegations of “fraud, misconduct and misrepresentation” which included using ‘neophytes’ on the implementation of the county’s ERP system. The new racketeering charges are especially interesting and the Marin Independent Journal has the details:

It alleges a conspiracy, asserting consultants wined and dined Culver and interviewed him for employment at the same time Culver was approving deficient work on the project, approving fee payments and helping line up new contracts.

“County taxpayers were charged for millions of dollars in services that Deloitte failed to properly perform” and residents were “defrauded of the honest services of a high-ranking county official,” according to County Counsel Patrick Faulkner.

Deloitte denied the allegations of the original suit, saying that Marin County was actually responsible for the snafu. However, and unfortunately for Deloitte, new shit has come to light:

Faulkner disclosed that the county has combed through its computer system to retrieve thousands of e-mails issued by consultants and Culver while they worked in county offices, providing a backbone for accusations leveled by the latest suit.

The complaint alleges six violations of the federal Racketeering Influenced and Corrupt Organizations Act by Deloitte and SAP, and three counts of illegal conduct against Culver, including a violation of the state anti-corruption statute.

So it doesn’t sound like there’s a smoking gun per se but enough back and forth that adds up to this:

The lawsuit, the county said in a press release issued late Thursday, claims that when problems with Deloitte’s work surfaced, Deloitte and SAP engaged in a “cover-up that included bribing Culver to falsely ‘approve’ Deloitte’s defective work, and silencing an SAP employee who tried to intervene on the county’s behalf.”

So, in other words, pretty bad stuff. The MIJ reports that “Settlement talks are expected and while the parties remain at odds, the latest court filing could spur negotiations.” Using our best translation skills, this more or less says, “Deloitte, SAP and Culver realize they’re fucked – begrudgingly – and will be going to the table any day now to sort things out.”

The Independent Journal also reports that SAP, Deloitte or Ernest Culver “could not immediately be reached.” Our own messages with Deloitte spokemen Jonathan Gandal and John La Place were also not immediately returned.

Marin County alleges racketeering in new lawsuit over computer debacle [MIJ]

BearingPoint Trustee Shaking Down Old Employees for Sketchy Expense Reimbursements

The Washington Post recounts Deloitte’s purchase of BearingPoint’s Federal Services business last year and as you might imagine it’s mostly a glowing piece about various aspects of the deal.

These include revenue growth “The company posted about $1.65 billion in federal revenue this year — up from combined revenue of about $1.43 billion before the acquisition,” the increase in headcount, “Deloitte hired close to 1,400 people, and the firm is now planning to add 160 to 170 more per month,” and expansion of services, “Deloitte had a more expansive set of services and products than BearingPoint — including tax, audit and consulting services — but BearingPoint, with more than 35 years in the federal business, had access to a larger set of clients.”

Sounds swell but there are some loose ends to tie up, most notably the trustee of BearingPoint’s liquidating trust is sending letters to former BearingPoint employees under the Deloitte roof to get some cash back for expenses that were deemed unnecessary for doing typical business in DC Metro:

John DeGroote, whose firm serves as trustee to BearingPoint’s liquidating trust, confirmed his company is now trying to reclaim BearingPoint expenses that were improperly reimbursed — either because the expense should not have been reimbursed or because the employee did not provide the right documentation.

The trust has sent out between 400 and 500 letters to former BearingPoint employees seeking $750,000 in expenses, $250,000 of which has already been returned, DeGroote said.

Since the “the expense should not have been reimbursed or because the employee did not provide the right documentation” you can safely assume that these were the standard three martini lunches at the District’s finer establishments, rub ‘n tugs and other expenses that would normally be a-okay but less-so when a rival buys you out.

BearingPoint acquisition has extended Deloitte’s reach [WaPo]