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Davis Urges Probe of Software Deal


SACRAMENTO — Gov. Gray Davis called Friday for an investigation by Atty. Gen. Bill Lockyer into an embarrassing and apparently overpriced $95-million software contract with Oracle Corp., and accepted the resignation of a department head who had a hand in negotiating the deal.

The Democratic governor's moves, announced after 6 p.m. Friday, come amid a legislative investigation into the deal and a highly critical state auditor's report. With Davis facing reelection, the contract, coupled with campaign donations from Oracle, gave fodder to his challenger, Bill Simon Jr.

In a letter to Lockyer, Davis said the auditor's report and recent news accounts "raise serious questions about how state departments decided to enter into the agreement." Davis asked that Lockyer "determine what occurred and the steps by which this contract was negotiated."

Davis also accepted the resignation of Barry Keene, a former state senator whom the governor appointed to head the Department of General Services in 2000. Keene helped negotiate the deal.

In his resignation letter, Keene took responsibility, saying: "It has pained me to see those close to you being blamed by political detractors for a poor decision that I made, and with which they had nothing to do."

Lockyer, who had already opened a preliminary inquiry, said he will continue his review and "investigate whether there was any wrongdoing."

Assemblyman Bill Leonard (R-San Bernardino) said Friday that Keene's resignation will not end the legislative inquiry. "If this is the only fallout, it doesn't close the case," he said. Leonard is on the legislative committee investigating the deal, and said he believes others closer to the governor also had significant roles in striking the deal.

Elias Cortez, the Davis appointee who is state Department of Information Technology director, also has come under scrutiny for his role in arranging the deal but remains on the state payroll. Cortez's department was established to help avoid such missteps after the state made a series of bad computer deals in the 1990s. Lawmakers now are considering abolishing the department.

Others in the governor's office also signed off on the deal, including Susan Kennedy, one of his top policy advisors, and Steve Nissen, a former top aide who now works for Manatt, Phelps & Phillips, a law firm that represents Oracle.

An audit released earlier this month concluded that the $95-million software contract would not save the state $111 million, as Oracle had said. Rather, the audit found, the contract could end up costing the state $41 million more than if there had been no contract.

The state awarded the contract without going through a competitive bidding process, a fact that the auditor said could void the contract.

State Auditor Elaine Howle found the state improperly relied on claims by Oracle and its partner in the deal, Logicon, that their software would save the state money. The audit also found that the state was evidently unaware that Logicon, a subsidiary of Northrop Grumman, stood to make more than $28 million on the deal.

By March, no state department had begun using the software, even though the contract had been in effect for nearly 10 months.

Davis' Republican challenger, Simon, issued a statement calling for a thorough investigation, saying: "Given the administration's reputation for linking policy and fund-raising, and the governor's personal style of micromanagement, I'm not convinced that the buck stops with Mr. Keene."

Oracle donated $25,000 to Davis in June, shortly after the state signed the contract with the firm. It contributed an additional $20,000 to Davis' reelection campaign in February. Logicon is not among Davis' donors. But its parent company, Northrop Grumman, has donated $55,993 to the governor's campaign committee.

Davis Press Secretary Steven Maviglio said "there is absolutely no connection" between donations and the contract, adding: "The people responsible for the contracts would be in no position to know about contributions to the governor, nor should they be. There are no dots to connect."

Representatives of Oracle and Logicon could not be reached for comment.

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