Top Davis Aides Say They Were Misled on Oracle

SACRAMENTO —  Top aides to Gov. Gray Davis testified Tuesday that they were either misled by their underlings or couldn’t recall details of events leading up to the administration’s decision to sign an embarrassing $95-million software contract with Oracle Corp. and a Northrop Grumman subsidiary.

Also Tuesday, Oracle avoided a legislative subpoena by agreeing that five employees, including the son of state Sen. Richard Polanco (D-Los Angeles), will testify early next month before the committee investigating the software-licensing agreement.

The Oracle deal gained notoriety after a highly critical state audit reported that rather than saving the state money, the contract might end up costing the state as much as $41 million. Since the audit’s release, Davis has suspended with full pay the head of the Department of Information Technology, and forced two other aides to quit. One of them, Arun Baheti, Davis’ director of e-government, accepted a $25,000 campaign donation from an Oracle lobbyist shortly after the state struck the deal.

In her testimony Tuesday, Cabinet Secretary Susan Kennedy said the first she had heard that Baheti violated administration policy by accepting the donation was when she read about it in newspapers this month, even though the Davis campaign was aware of the incident last June, when the donation arrived.

Democrats controlling the committee blocked state Sen. Ray Haynes (R-Riverside) from pressing Kennedy about the donation and about the governor’s policy against government aides mixing politics and policy.

Kennedy, the highest-ranking administration official to appear before the legislative committee, told lawmakers she was presented with and signed a so-called Governor’s Action Request on May 31, 2001. That document, approved by several top administration officials, opened the way for the state to enter into the deal with Oracle on that date. Oracle set May 31 as the deadline for signing the deal, hoping that it could reflect the contract on a quarterly earnings statement.

Kennedy said she signed the Governor’s Action Request after being assured that while it might not save the state more than $100 million, at least there would be some savings. But like other Davis aides who have testified, Kennedy said in sworn testimony that she never briefed the governor about the deal.

The agreement, she said, was “rather arcane.”

Kennedy said she was unaware of key facts, including the existence of the Northrop subsidiary, Logicon, let alone that the company was involved in the deal and stood to make $28 million once the state agreed to a software-licensing agreement with Oracle.

Nor was she aware that while action requests are supposedly confidential documents, a high-ranking official in the Department of General Services provided an early draft of the request to Logicon, and that the company may have helped write the document.

Kennedy signed the deal after Aileen Adams, Davis’ secretary of consumer affairs, called her multiple times May 31 seeking a meeting that day. In her testimony, Adams, who also signed the action request, said she first saw a draft of the document May 29.

Adams said she mistakenly believed that the Department of Information Technology, responsible for such contracts, had done a “needs assessment,” and that state departments could benefit from the contract. She also said underlings who had reservations about the deal had an obligation to tell her “anything negative.”

As it turned out, she heard no dissents. If she had known that Department of Finance officials had concerns, she “would have headed in a different direction.”

In more than fours hours of testimony, Adams repeatedly said she couldn’t recall an array of details ranging from when she signed the request to whether she has an active license to practice law in California.