Professional Documents
Culture Documents
Marin County Complaint Against Deloitte Consulting On Failed SAP Project
Marin County Complaint Against Deloitte Consulting On Failed SAP Project
[POCS@[Q) I
SUPERIOR COURT OF CALIFORNIA
County of Marin
MAY 28 2010 I
P.O. Box 4988 KIM 1URNER, Court Executive Officer
MARIN COID,Y SUPERIOR COURT
By: it. Main, Deputy
San Rafael, CA 94913-4988
I
NOTICE OF CASE
MANAGEMENT CONFERENCE
(CIVIL)
b
This case is subject to the Trial Court Delay Redu ·i n Act, Govemment Code § 68600 et seq., and Civil
Rules of the Uniform Local Rules of the Marin County Superior Court (hereafter MCSC Civil Rules).
Pursuant to ca
Department
� ia Rules of Court 3.734, this case is assigned to Judge
. This assignment is for all purposes.
h'W
MCSC Civil Rule 1.18 and CRC 3.11O(b) and 3.221 (c) requires that the Summons and Complaint, a copy
of this notice, a blank Case Management Conference Statement form, and an ADR information package
be served and that Proof of Service be filed within 60 days of the filing date of this Complaint. CRC
3.110(d) requires that defendants file responsive pleadings within 30 days of service, unless the parties
stipulate to an extension of not more than 15 days.
a. Comply with the filing and service deadlines in MCSC Civil Rules 1.18 and CRC 3.110, or APPEAR
IN PERSON at the Order to Show R use hearing on the dates set forth below:
3. You must be familiar with the case and be fully prepared to discuss the suitability of the case for
binding or non-binding arbitration, mediation, or neutral case evaluation. Counsel must discuss
ADR options with their clients prior to attending the CMC and should be prepared to discuss
with the court their authority to participate in ADR.
4. Case Management Conference Statements must be filed and served on all parties, including the
Court, at least 15 calendar days before the CMC (CRC 3.725). (A $49.00 sanction will be charged
for late filing of a statement.)
:
3501 Civic Center Dr., Rm. 275, San Rafael CA 94903
TELEPHONE NO. (415) 499-6117 FAX NO .• (415) 499-3796
CASE NAME:
County of Marin v. Deloitte Consulting UP
7 1. 0 0 2 7"8' .
[XJ D V
'-;;'�F--------------i
Unlimited Limited
(Amount (Amount D Counter D Joinder
, JUDGE
demanded
exceeds $25,000)
demanded is
$25,000 or less)
Filed with first appearance by defendant
(Cal. Rules of Court, rule 3.402)
JAIv1ES R. RITCHIE
DEPT.
D Auto (22) D Breach o(contractlwarranty (06) (Cal. Rules of Court, rules 3.400-3.403)
D Uninsured motorist (46) D Rule 3.740 collections (09) D AntitrustfTrade regulation (03)
D Business tort/unfair business practice (07) D Other real property (26) Enforcement of Judgment
D Intellectual property (19) D Drugs (38) D Other complaint (not spedfied above) (42)
D Professional negligence (25) Judicial Review
Miscellaneous Civil Petition
D Other non-PI/PDNVD tort (35) D Asset forfeiture (05)
D Partnership and corporate governance (21)
Employment D Petition re: arbitration award (11)
D Other petition (not specified above) (43)
D Wrongful termination (36) D Writ of mandate (02)
2. This case is is not complex under rule 3.400 of the California Rules of Court. If the case is complex, mark the
factors requiring exceptional judicial management:
a. D Large number of separately represented parties d. [i] Large number of witnesses
b. D Extensive motion practice raising difficult or novel e. D Coordination with related actions pending in one or more courts
issues that will be time-consuming to resolve in other counties, states, or countries, or in a federal court
c. [XJ Substantial amount of documentary evidence f. D Substantial postjudgment judicial supervision
3. Remedies sought (check al/ that apply): a. [XJ monetary b. [XJ nonmonetary; declaratory or injunctive relief c. [XJ punitive
4. Number of causes of action (specify): 6: fraud (2), negligent misrepresentation, breach of contract/warranties (2), professional negligence
5. This case D is
6. If there are allY knowll
Date: May L�, 2u
Sheila S.
[XJ is not a class action suit
ieJ ated cases, file and serve a notice of related case. (y;ou
0
Lichtblau
�� CM-015 ) . .
.
� .
(TYPE OR PRINT NAME) ARIY WAr loRNE9 ,""OR PARI9j
NOTICE
under the Probate Code, Family Code, or Welfare and Institutions Code). (Cal. Rules of Court, rule 3.220.) Failure to file may
• Plaintiff must file this cover sheet with the first paper filed in the action or proceedinQ (except small claims cases or cases filed
result in sanctions.
File this cover sheet in addition to any cover sheet required by local court rule.
3.400
.
•
• If this case is complex under rule et seq. of the California Rules of Court, you must serve a copy of this cover sheet on
all other parties to the action or proceeding
• Unless this is a collections case under rule 3.740 or a complex case, this cover sheet will be used for statistical purposes only.
NOTICE! You have been sued. The court may decide against you without your being heard unless you respond within 30 days. Read the
infonnation below.
You have 30 CALENDAR DAYS after this summons and legal papers are served on you to file a written response at thi,s court and have a copy
served on the plaintiff. A letter or phone call will not protect you. Your written response must be in proper legal form if you want the court to hear your
The name and address of the court is (8 nombre y direcci6n de la corte es):
SUPERIOR COURT OF THE STATE OF CALIFORNIA,
COUNTY OF MARIN
3501 CIVIC CENTER DRIVE. SAN RAFAEL CA 94903
The name, address, and telephone number of plaintiff's attorney, or plaintiff without an attomey, is:
(EI nombre, la direcci6n y el numero de telMono del abogado del demandante, a del demandante que no tiene abogado, es):
PATRICK K. FAULKNER - COUNTY COUNSEL
3501 CIVlc CENTER DR_, RM. 275, SAN RAFAEL, CA 94903 (415) 499-6117
DATE:
MAY 2 82010 l1,TTh JJ T ",:-l\,F�""' Clerk, by ,
"" hW'l.IM.
, Deputy
(Fecha) l'UJ.V.l I U-,-u'lD.1(, • '
(Secretano) . � (Adjunto)
(For proof of service of this summons, use Proof of Service of Summons (form POS-010).)
(Para prueba de entrega de esta citati6n use el formulario Proof of Service of Summons, (POS-010)),
NOTICE TO THE PERSON SERVED: You are served
[SEAL]
1, U as an indiVidual defendant
2, D as the person sued under the fictitious name of (specify):
under.
D CCP416,10 (corporation) D CCP416,60(minor)
D CCP416.20 (defunct corporation) D CCP416,70(conservatee)
� CCP416.40(association or partnership) D CCP416.90(authorized person)
D other (specify):
4, D by personal delivery on (date):
Page 1 of1
Form Adopted for Mandatory Use Code of Ovil Procedure §§ 412.20, 465
JudiCial Council of California SUMMONS www_courtintocB_OOV
SUM-100 [Rev. July 1, 2009]
8 County Counsel
SHEILA SHAH LlCHTBLAU (SBN 167999)
9 Deputy County Counsel
3501 Civic Center Drive, Room 275
10 San Rafael, California 94903
11 Telephone: (415) 499-6117
Facsimile: (415) 499:3796
12 [email protected]
[email protected]
13
Attorneys for Plaintiff
14 COUNTY OF MARIN
25 PRELIMINARY STATEMENT
26 1. This action arises from the fraud and other misconduct of Deloitte, a software
27 consulting fInn, in misrepresenting its skills and experience to induce the County to enter into a
2 assessment of its software systems, the County concluded that it was necessary to replace its aging
3 and fragmented financial management, payroll and human resources ("HR") legacy systems with
5 3. Given the extrao,dinary operational risks i n replacing its core fmancial and
6 sensitive HR and payroll systems-- and because the County had no prior experience implementing
7 an ERP system -- the County decided that it would have to hire and rely on a software consulting
8 fmn to provide the necessary resources, skills and experience to lead, manage and deliver a·
11 campaign to be hired by the County. As part of its sales efforts, Deloitte repeatedly represented to
12 the County that Deloitte consultants had the requisite skills and experience to successfully
13 implement a complex ERP software product specifically designed for public sector entities,
14 developed and licensed by SAP A G and SAP America, Inc. ("SAP for Public Sector"). Deloitte
15 further represented that for the County's SAP implementation, Deloitte had assembled a tearn of its
16 "best resources" who had "deep SAP and public sector knowledge."
17 5. These representations were fraudulent. Indeed, a t the time Deloitte made them,
18 i t knew that it did not have the ability or intention to provide the skilled resources necessary to
19 deliver a successful SAP implementation for the County. Deloitte also knew that because the
·20 County did not have any prior ERP implementation experience in general, or SAP experience in
21 particular, i t would b e dependif.lg on Deloitte to oversee, guide and manage the project.
22 Notwithstanding such knowledge, Deloitte made these false representstions in order to obtain the
25 Deloitte as its SAP systems integrator.. Yet rather than providing the CoUnty with SAP and public
26 sector expertise, Deloitte used the County's SAP project as a trial-and-error training ground to
27 teach its consultants - many of them neophytes -- about SAP for Public Sector software, all at the
28 County's expense.
2 fraudulent scheme to ensure that the County would not learn the truth about Deloitte's pre-contract
3 misrepresentations until Deloitte's fees had been paid. As part of its fraudulent performance of the
4 contract, Deloitte: intentionally andlor recklessly failed to disclose to the County that Deloitte's
5 lack of SAP !lJ1d public sector skills resulted in a defective SAP system; withheld information
6 about critical project risks; falsely represented to the County that the SAP system was ready to
7 "go-live" as originally planned; conducted woefully inadequate testing; and concealed that it had
8 failed to perform the necessary testing, thereby ensuring that system defects would remain hidden
10 8. All the while, Deloitte continued to invoice the County, collecting more than $ 1 1
11 million in fees. Fearing that a delay in the go-live could jeopardize payment, Deloitte failed to
12 .disclose to the County that, as Deloitte knew, the SAP system it had designed and implemented
13 would not b e able to meet the County's most basic functional requirements, and would in fact
16 installed and poorly functioning SAP system that was incapable of perfonning the County's
17 financial, HR and payroll functions. After serving as Deloitte' s SAP installation guinea pig for
18 nearly two years, the County was saddled with a costly computer system far worse than the legacy
. 20 1 0. To date, nearly four years after the initial go-live of the SAP system that Deloitte
21 designed and implemented, the County continues t o struggle with ongoing performance problems,
22 functionality limitations and other crippling defects. Deloitte, on the other hand, has pocketed
25 II. Moreover, upon infonnation and belief, Deloitte's misconduct on the County's
26 Project was part of a pattern and practice of misconduct, as reflected by other problem-p lagued
27
28
3
COUNTY OF MARIN'S COMPLAINT AGAINST D ELOITTE CONSULTING LLP
1 SAP public sector implementations for which Deloitte served as integrator during the same time
2 period.
3 12. By this action, the County seeks to recover the more than $30 million in damages
5 THE PARTIES
7 14. Upon information and belief, defendant Deloitte is a limited liability partnership
8 organized under the laws of the State of Delaware and has its principal place of business in New
9 York, New York. Deloitte is the consulting services arm and subsidiary of Deloitte & Touche
10 USA LLP, the U.S. member firm of Deloitte Touche Tohmatsu, one of the world's largest
13 15. This Court has personal jurisdiction over De\oitte, a limited liability partnership
14 that does business in the State of California, pursuant to Section 410.10 of the California Code of
15 Civil Procedure.
16 16. Venue is proper in this Court because Deloitte's fraudulent and other misconduct
17 took place in Marin County, and the parties' contract provides for the County of Marin, or a
18 federal court located in the Northern District of California (as applicable), as the exclusive forum
20 FACTS
23 the Golden Gate Bridge from San Francisco. The legislative and executive body of the County
24 consists of a Board of Supervisors (the "BOS"), which appoints the County Administrator who is
25 responsible for implementing board decisions, preparing the County budget, providing supervisors
26 with the information they need to make decisions, and coordinating the administration of County
27 government.
28
4
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 18. Serving a population of approximately 250,000 residents, the County provides its
2 constituents with regional services (such as libraries and parks), municipal services (such as police
3 and fire protection) and state-established health care, welfare and other benefits. The County is
4" one of the largest employers in the region, with approximately 2,500 employees on its payroll, and
6 19. The financial management, payroll and HR systems are the administrative
7 backbone of the County, and provide the essential infrastructure for carrying out the County's
8 gov,enunent business. These systems include, among other functions, genetal1edger, accounts
II 20. In February 2003, the County commissioned the Government Finance Officers
13 management, payroll and HR systems. The GFOA concluded that the County's existing systems
14 were outdated and inconsistent with industry standards in th�t, among other things, they were
15 supported by a series of incompatible systems, operating on separate platforms, that were largely
17 21. The County was also advised by AMS, the vendor of its then-existing financial
18 management software, that after July 2005 AMS would no longer be supporting the version of the
20 22. Accordingly, in 2004, to improve internal operational efficiency and its ability to
21 serve its constituents, the County decided t o replace i t aging financial management, payroll and
22 HR systems with an ERP system that would integrate the activities o f all County departments o n a
23 single, unified software platform (the "Project"). The Project to implement the ERP system at the
25 23. The primary objective of MERIT was to provide the functionality required to
26 operate the County's business processes by implementing ERP software that would: 0) simplify
27 and automate business processes; (ii) allow greater access to real-time information; and (iii) offer
28 enhanced reporting and analysis capabilities, Through MERIT, th e County intended t o obtain a n
5
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 ERE system that would reduce operating costs and system fragmentation, overcome functional
2 . limitations and provide improved customer service by enhancing the ability of the County's
3 financial and human resources staff to deliver County services and activities.
4 24. . At the time the County made its deCision to proceed with an ERP system, ERE
5 was already the standard technology platform for government organizations, and SAP for Public
6 Sector was the leading ERP software solution used by government organizations.
7 25. Given the complex operational processes and functionality requirements unique
8 to public sector entities, and because the County had no prior experience implementing an ERE
9 system, the County knew that i t had to rely entirely on outside consultants with: (i) a deep
10 understanding and knowledge of public sector requirements; (ii) a mastery of the ERP application
JI ultimately selected; and (iii) skills and experience in managing public sector ERE projects .
12 26. . Recognizing that the success of the Project depended on the capabilities of the
13 y
consultants assigned, the County pursued a rigorous s stems integrator selection process. The
14 selection process was structured so that the various consulting firm candidates would team up with
15 an ERP vendor of their choosing to propose a detailed implementation plan for the County.
16 27. Reflecting that the County's paranl0unt criterion for retaining a systems
17 integrator was requisite public sector and E RP implementation experience and skills, the County's
18 Request for Proposal ("RFP"), issued in April 2004, explicitly provided that responses were sought
19 only from candidates with "proven experience" i n successfully installing and implementing ERE
20 systems in public sector environments similar in size and scope to the County.
21 28. The RFP 'required that each response include a discussion of the scope of work
22 proposed and an analysis of the functional and technical fit of the proposed software to the
23 County's requirements. The RFP further sought detailed information concerning, among ' other
24 things, the candidates' approach and plan for: (i) preparing County employees for the changes
27 ensure that County employees could use the new system to perform their job functions;
28 (iii) performing thorough testing of the software system prior to go-live; and (iv) adhering to a
6
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 recognized methodology for implementing ERP software.
2 29. The County received 13 responses to its RFP, including Deloitte's proposal,
3 which recommended the implementation of SAP software as an "'off-the-shelf system" that "can
4 be implemented without customization" to meet the County's functional requirements and achieve
5 all of the County's goals. That representation, along with many others described below, was false,
9 30. In its campaign to be selected as the systems integrator, Deloitte represented that
10 its consultants had an "in-depth understanding of gpvernment programs" and "deep experience
11 wit h SAP implementations for state and local government," and that it had "assembled a highly
12 skilled and experienced public sector-knowledgeable project team" to work on the MERIT project.
14 Deloitte that County employees did not have experience working on projects such as MERIT, and
15 that if Deloitte was selected, the County would be relying entirely on the Deloitte consultants, who
'16 would be the only people on the Project with knowledge of the SAP software.
17 32. The County explicitly advised Deloitte that the County would not accept "joint
18 leadership" on Project tasks, and requested that Deloitte clarify, in writing, those Project activities
19 for which Deloitte would be ultimately responsible as the "Lead" party. Deloitte did so, taking
20 responsibility, in writing, and identifying itself as "Lead" party for all but two Project activities.
21 33. In response to the County's concerns regarding the experience level of its
22 consultants, Deloitte repeatedly represented during the selection process, both in writing and
23 orally, that it had an "outstanding," "seasoned team with deep SAP, public sector and functional
25 methodologies, change management and project management skills, for successfully implementing
27 34. Deloitte further represented its commitment to dedicating its "best resources" to
28 the MERIT project, and described itself as "unmatched in terms of [its1 bench strength to draw
7
COUNlY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 additional resources where required."
2 35. When County officials raised software testing as another area of concern during
3 the selection process, Deloitte assured the County that Deloine would perform "two cycles of
4 integration testing," and further guaranteed that "[s]teps that aren't successfully executed [during
5 the first cycle] will be fixed and retested to ensure they work properly." Deloitte also represented
6 that its implementation methodology included the performance of negative testing, stresslload
7 testing and parallel testing for payroll processing to ensure that the new SAP system would
9 36. During the selection process, the County also sought further clarification from
10 Deloitte i n connection with change management and training. The County was partiCUlarly
11 concerned that Deloitte's initial RFP response did not provide a sufficiently vigorous plan for
12 change management, "given the strongly decentralized nature of [the County's] organization."
13 The County likewise expressed concerns over Deloitte's proposed approach for training and
14 knowledge transfer.
15 37. The County advised Deloitte that Deloitte's proposed "train the trainer" approach
16 was inadequate, and requested alternative training plans, incll.\ding "process-based" training that
19 County's need for more robust change management and proposed a "richer change management
21 transfer" program·that would ensure that County Project tearn members acquired "all th e necessary
22 skills to support the program after the consulting resources have rolled off the project."
23 39. Deloitte further responded to the County's request for more thorough training,
24 acknowledging that it understood that the County had "no prior SAP training or experience."
26. Deloitte made numerous pre-contract oral representations to the County during the systems
27 integrator selection process. These representations, made by Deloitte direCtor, Mark Seidenfeld,
28 and other Deloitte employees, including Jennifer Michaud and Michelle Shuttleworth, to County
8
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 officials and employees, including, among others, Matthew Hymel, Heather Burton and Katie
2 Geier, likewise related to Deloitte's purported: SAP project management and change management
3 skills, experience and expertise; implementation methodologies; and understanding of the SAP for
4 Public Sector software solution in general, and the SAP for Public Sector sof1ware as it would have
5 to be configured to meet the unique needs and requirements of th e Comity and b e integrated with
7 41. Concerning Deloitte' s purported skills, experience and expertise in SAP, its
8 qualifications to act as the systems integrator and project manager on the Project and its
9 commitment to the County, the false a n d misleading representations Deloitte made to the County
10 during the summer and fall of 2004, including in its RFP response, dated June 7, 2004 and at on
11 site presentations at the County on or about September 16, 2004 and November 12, 2004, included,
13 (a) "...we are uniquely qualified in our understanding of county issues and
14 challenges ..."
. 15 " ...deep experience with SAP implementations for state and local
(b)
16 government."
17 (c) "[W]e have assembled a highly skilled and experienced public sector
19 (d) "[Wle provide experienced consultants who have both breadth across SAP
22 (e) "[A] seasoned team with deep SAP, public sector .and functional
23 experience."
24 (f) "The breadth of our capability and our understanding of the County is
25 unmatched."
3 (k) . "Among Deloitte Consulting'S greatest strengths is the inte iP:ation of all
4 aspects of ERP implementations."
5 (1) "To meet the needs of public sector clients, we are able to draw upon the
8 42. During the integrator selection process, Deloitte also touted its pUI}Xlrtedly close
9 relationship with SAP America and SAP AG (the "SAP Companies"). These representations were
10 intended to induce the County into believing that Deloitte had a unique partnership with the SAP
11 Companies s uch that the COU\lty, as a Deloitte client, would receive special treatment, attention
12 and resources from the SAP Companies in connection with its MERIT project.
14 made by Deloitte, and interviews with the proposed Deloitte consultants and project managers
15 (many of whom never showed up to work on the Project, or were later rolled off the Project), the
16 . County selected Deloitte as the SAP systems integrator. In making its decision, the County was
17 persuaded by Deloitte's repeated and explicit representations and assurances that its personnel
18 were highly qualified, skilled and experienced in the SAP for Public Sector software, and that
19 Deloitte's testing, change management, training and project management skills and expertise,
20 including the application of its proprietary methodology and risk identification processes, would
22 44. Despite the County's diligence during the integrator selection process,
23 unbeknownst to the County at the time, the express written and oral pre-contract representations
24 made by Deloitte concerning its purportedly extensive skills, expertise and experience in SAP for
25 Public Sector software, project management and change management, were false. The County
26 relied on these misrepresentations to its detriment in hiring Deloitte to be the integrator for the
27 MERlT project.
28
o
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 45. On March 29, 2005, in good faith reliance on Deloitte's representations, the
2 Connty entered into a master contract with Deloitte, the Implementation Services Agreement (the
3 "ISA"). The ISA provided the general terms and conditions nnder which Deloitte would provide
4 services on the Project The services to be performed by Deloitte were further detailed in a foJlow-
5 on Statement of Work ("SOW'�, dated April 28, 2005. The ISA and SOW, together with
6 subsequent written change orders entered into by the parties during the Project, formed the parties'
9 46. Under the ISA, Deloitte was responsible for the "planning, validation,
11 integrated ERP administrative information system" that would "meet the County's needs and
12 requirements" and provide "all of the functionality" identified in a nearly ISO-page Functional
15 "industry-specific knowledge and best practices," and reaffirmed that it had "sufficient highly
.16 qualified personnel available" with "skills and experience" to implement the SAP for Public Sector
17 software i n such a way a s t o provide the County will all of the functionality it required.
18 Additionally, Deloitte explicitly promised "to provide leadership," including change management
19 experience, i n implementing the SAP system forthe County. Deloitte also committed t o providing
20 "such experience [and] consulting assistance .. : necessary to the success of the Project."
21 48. Other contTact provisions obligated Deloitte to; among other things: (i) perform
22 specific software testing; (ii) utilize both the standard SAP methodology developed by SAP
24 throughout the course of the Project; (iii) provide change management and training services; and
26 49. The ISA also contained an explicit warranty by Deloitte that its contractual
27 services and work product would be "performed and completed" by "competent and qualified
2 50. As detailed below, Deloitte materially breached the Agreement and express
4 (a) failing to implement an SAP system that met the County's needs, much less
6 (b) failing to use best practices for govenunent organizations consistent with
8 (c) . failing to provide Project leadership by, among other things, failing to
11 ThreadManagerTM;
13 (f) failing to competently manage risks encount ered in connection with its
18 51. Deloitte's misconduct on the Project was notlimited to the above performance
19 failures. Deloitte also violated the conflict-of-interest provision contained in the ISA, which is
20 supposed to protect the County against any attempt by the integrator to manipulate or influence
21 County representatives "in a manner contrary to the best interest of the County." Contrary to this
22 prohibition, Deloitte wrongfully used the County's former Project manager, Ernest Culver, as part
24 52. As part of this scheme, Deloitte had Mr. Culver purport to "sign off' on sub-
25 standard, deficient or uncompleted work that Deloitte claimed to have performed, and that, in
26 some cases, other County employees had rejected. Deloitte's misconduct in concealing risks from
28
12
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
I D. The Problems, Deficiencies, Errors and Flaws in Deloitte's Performance
2 53 . In or about May 2005, Deloitte dispatched its consultants to commence work on-
3 site at the County's offices. The Project timeline set by Deloitte provided for a phased approach
4 under which: (i) the new SAP system running the County's financials would be implemented by
5 July 3, 2006 ("Release I"), and (ii) the County' s payroll and HR processes would be operating on
7 54. Deloitte's work on the Project not only breached the Agreement, but ultimately
8 revealed that its representations to induce the County to contract with it were false.
9 55. Deloitte's work o n the Project demonstrated that, contrary to its representations
10 to the County, Deloitte: (i) lacked the ability and/or the intention to provide the County with
II consultants who had the necessary skills, experience and expertise i n SAP for Public Sector, SAP
12 in general, project management and change management; (ii) lacked a close relationship with the
13 SAP Companies; and (iii) was unable to properly design, implement and integrate an SAP for
14 Public Sector system capable of processing the County's basic business functions and interfacing
16 56. As set forth below, Deloitte' s work on, and management of, the Project was
17 maned by problems, defects, deficiencies and enors, including, among other things, the following:
18 (i) Deloitte failed to properly blueprint, design, fonnulate and prepare the functional specifications
19 for the County's business processes in the context of an SAP for Public Sector solution;
20 (li) Deloitte failed to properly configure and implement the SAP system to meet the County's
21 requirements; (iii) the personnel Deloitte provided to work o n the Project lacked the necessary
22 SAP and publi c sector skills, experience and expertise, which undermined their work on virtually
23 every aspect of the Project; and (iv) Deloitte failed to test the system adequately so that the bugs,
24 defects and flaws in the SAP system would not be detected prior to the go-live, but instead would
25 remain hidden, only to surface -- and inflict severe damage on the County -- after the SAP system
27
28
3
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 (a) Deloitte's Flawed Blueprinting, Design and
Configuration of the SAP System Doomed the Project
2
3 57. A critical part of any SAP implementation is the blueprinting phase, during
4 which the functional consultants identify the client's existing business processes and requirements
5 (the "as is" processes) and then formulate a design for the future business processes in the context
7 58. The blueprinting phase generates the design and functional specifications
8 documents upon which the technical software consultants rely to write programs and configure an
10 59. Another crucial focus of the blueprinting phase is to identify and map the
11 required interfaces between the SAP system and a client's other software systems that will need to
12 pass data to, and receive data from, the SAP system. The functional specifications and related
13 design documents for interfaces are likewise relied upon by the programmers o n the technical
16 processes and interfaces during the blueprinting phase, if not corrected early in the implementation
17 schedule, results i n a n SAP system that is improperly configured and coded, and that will therefore
19 61. . Deloitte headed the blueprinting and design phase of the Project. Deloitte was
20 responsible for preparing the functional specifications and related design and mapping
21 documentation on which its consultants relied to configure the system, build interfaces and write
23 62. As became fully evident only after the SAP system went live, the functional
24 specifications and design documents for the programs and interfaces that Deloitte prepared were
25 incomplete, deficient and poorly designed. The configuration decisions ofDeloitte's consultants
26 were likewise deficient and flawed. Deloitte's design, programming and configuration failures are
27 attributable directly to its consultants' lack of SAP and public sector skills, their unfamiliarity with
28 the SAP for Public Sector product and functionality and their ignorance of, and failure to employ,
4
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 SAP for Public Sector best practices.
4 alleged ability and intention to furnish the County with appropriately experienced and skilled SAP
5 and public sector consultants were materially false and misleading. When those representations
6 were made, Deloitte knew that it had nowhere near a sufficient number of consultants with the
7 requisite skills and experience to deliver a successful implementation, and Deloitte knew that it
8 had no intention (because, among other things, it had no capability or financial incentive) to
11 expertise, few o f the Deloitte consultants assigned to the Project had both relevant SAP and public
12 sector experience, and, with respect to the few Deloitte consultants who did have such experience,
14 65. Indeed, some of the Deloitte consultants assigned to the Project were so
15 unfamiliar with the SAP for Public Sector software that they had to attend the same SAP Academy
-16 "boot camp" that the County Project t eam members attended. Because the Deloitte consultants
17 were learning the SAP software alongside the County Proj ect team members, Deloitte was utterly
18 incapable of providing the County with the necessary expert advice, guidance or leadership.
19 66. During the implementation, Deloitte consultants, including team leads, were also
20 removed from th� Proj ect due to their incompetence, but were not replaced by Deloitte. Deloitte
21 also failed to provide the County with a consultant who had any knowledge ofSAP's Grants
22 module, one of the modules Deloitte was contracted to implement. Nor was Deloitte able to
23 assign consultants to the Project procurement team who had the requisite public sector experience
24 or were knowledgeable in SAP's Fixed Assets or Accounts Payable modules, both critical
26 67. Moreover, the few Deloitte consultants who had (or had acquired, on the
27 Project) any modicum of public sector skills were rolled off the Project by Deloitte mid-stream to
28 assist with the much larger and higher profile SAP implementation for another Deloitte client.
15
COUNTY OF Mi\.RIN'S COMPLi\.lNT AGi\.lNST DELOITTE CONSULTING LLP
1 68 . Contrary to Deloitte's pre-contract representations that it would provide the
2 County with consultants who were SAP for Public Sector experts with deep knowledge of public
3 sector requirements, the only consultant provided by Deloitte who worked for any appreciable
4 time on the Project, and who had any prior (though limited) SAP for P1,lblic Sector experience,
5 was unable to perform the work necessary to implement and integrate all of the SAP modules.
7 assigned to the Project were not part of the purportedly experienced consultant team that Deloitte
8 had touted to the County during Deloitte's sales campaign. Instead of assigning ,skilled
9 consultants with SAP and public sector experience, Deloitte staffed the Project with dozens of
' 10 neophyte consultants, many of whom lacked even a basic understanding of SAP.
11 70. Through this "bait-and-switch" sales technique, Deloitte induced the County into
12 hiring Deloitte in the belief that, based on Deloitte' s specific representations, Deloitte had the
13 ability and intention to assign competent SAP for Public Sector-experienced personnel to the
14 Project. In fact, Deloitte had neither the ability nor the intention to assign such personnel to the
15 Project.
17 shuffled its personnel on to and off o f the Project. The revolving door of Deloitte consultants
18 severely disrupted the Project in that, among other things, it: (i) deprived the County of the few
19 Deloitte personnel who had acquired some relevant SAP or public sector skills; (ii) deprived tlle
20 County of the few Deloitte personnel who had gained some fanuliarity with and understanding of
21 the County's business processes; (ili) resulted in incomplete and ineffective training of
22 replacement consultants (in those cases where replacements were provided); and (iv) led to delays
23 in the performance of Project tasks and inferior work product, as various tasks were not performed
24 and monitored by the same person from beginning to end, Qr even for substantial periods of time. '
25 72. Notwithstanding that Deloitte, as the Project integrator and manager, was
26 uniquely in a position to know the staffIng arrangements and level of SAP for Public Sector and
27 project management experience and expertise that was necessary for the Project, Deloitte supplied
28 personnel whose SAP and public sector experience was insufficient to perform a proper
16
COUNTY OF MARlN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 installation in the first place, and then aggravated that problem through its reassignment practices.
4 73. As the design phase for Release I was nearing completion, Deloitte
5 recommended to the County that it accept an opportunity to be a "Ramp-Up" customer for a new
6 version of the SAP software, known as ERP 2005, that had not yet been released to the public.
7 74. Deloitte touted the purported advantages of being a Ramp-Up customer, and
8 represented that it would be able to fully support the County in implementing this new unreleased
9 software product. Deloitte further represented to the County that the new ERP 2005 software
10 would provide flexibility and scalability that could not b e achieved by implementing the version
13 customer. At the time i t made this decision, however, the County was unaware o f the increased
14 risks posed b y implementing a brand new SAP software product. Deloitte was aware of these
15 risks, but failed to advise the County of them. Nor did Deloitte readjust the Project timelines, or
16 assign additional resources, to mitigate or manage the inherent risks associated with the
17 ' implementation of a brand new SAP product on which its consultants had neither trained nor
19 76. In persuading the County to implement the neW software, Deloitte falsely
20 represented that it could successfully implement the ERP 2005 software product for the County,
21 andlor failed to disclose to the County that Deloitte i n fact lacked the skills necessary to deliver an
22 ERP 2005 system to process the County's financial, HR and payroll processes.
23 77. Instead, Deloitte touted its purportedly close relationship with the SAP
24 Companies, and falsely assured the County that Deloitte would be able to secure skilled SAP
25 consultants, and provide its own skilled consultants, to successfully deliver the implementation of
26 this brand new SAP software. By so doing, Deloitte intended to convince the County to
27 implement ERP 2005 to provide Deloitte with the opportunity to gain exposure to ti1e ERP 2005
28
17
COUNTY O F MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 product, and to thereby market itself to prospective customers as "experienced" ERP 2005 public
2 sector consultants.
3 78. In its design documents, Deloitte also failed to address and account for
4 differences in the ERP 2005. Consequently, when the flawed design documents were handed over
5 to the Deloitte programmers for coding, the result included massive configuration problems,
8 79. Deloitte led the testing phase of the Project. Deloitte's testing of the SAP
.9 system before it went live was fundamentally flawed and woefully inadequate. Among many
10 deficiencies, Deloitte failed to follow standard testing protocol, including the design and
1I development oftesting scripts that wonld detect bugs in the system and other design flaws.
12 80. Deloitte also failed to test the kind and quantity of data transactions needed to
15 resulted in a highly compressed testing schedule. Some functionality was not tested at all because
16 Deloitte continued to work on the SAP system right up until the go-live.
17 82. Deloitte also deliberately "under-tested" the system to conceal defects and keep
18 the go-live schedule intact. Refusing to conduct tests that simulated the County's actual business
19 scenarios, Deloitte wrote simplistic test scripts and, in some cases, failed entirely to test certain
20 development objects. Other testing was not performed because Deloitte knew that if those tests
21 were conducted, they would undoubtedly fail, alerting the County to the extent of the system's
22 defects.
23 83. Deloitte also failed to perform essential "end-to-end" integration testing, cri.tical
24 in determining whether the SAP system could properly interface with non-SAP systems on which
25 the County depended. Without such integration testing, the interoperability of the SAP system
27 84. While Deloitte's flawed and incomplete testing stemmed in part from its lack of
28 public sector SAP expertise and general incompetence, Deloitte' s inadequate testing also reflected
1
COUNTY OF MARIN'S COMPLAINT AGAINST DEWITTE CONSULTING LLP
1 a deliberate effort to conceal its own deficient work product, continue to collect fees and proceed
2 , with the scheduled go-live dates at all costs. Thus, Deloitte repeatedly ignored or rebuffed input
3 fro m the County employees who questioned whether Deloitte was running test scripts that were
4 too simplistic, as opposed to conducting tests that simulated the County's actual complex business
5 scenarios. Deloitte knew, or should have known, that by intentionally failing to perform adequate
6 testing of the SAP system prior to the go-live, it was exposing the County to potentially
7 devastating harm.
8 85. For example, Deloitte failed to perform a year-end close which would have
9 confirmed whether the S AP system could produce essential financial statements. Deloitte's failure
10 was a departure from the standard practice for SAP public sector implementations - - the kind of
II departure that Deloitte knew would likely pose devastating consequences to the County.
12 86. In addition to failing to test the kind and quantity of data transactions needed to
13 replicate accurately the reality o f the County' s business, Deloitte also failed to test "negative
14 scenarios" that could have revealed where within the SAP system, or within the interfaces between
IS the SAP system and the other systems, problems might lurk. Indeed, it was a Deloitte practice
16 during the testing phase to "mock-up" the test data when tests hit a "fail point" so that it could
17 bypass the failed stage and allow the test to continue to run to completion, without ever fixing the
18 problems. As it happened, many of the "negative scenarios" that Deloitte did not test were
19 precisely the scenarios that, when they occurred in the live production environment following the
20 go-live, proved the most problematic, and inflicted the greatest damage on the COWlty. By
21 deliberately "under-testing" in this ,manner, Deloitte ensured positive -- albeit wholly artificial --
22 test results that provided a false validation of the SAP system's ability to maintain data integrity
24 87. In its haste to meet the January 3, 2007 go-live date and obtain its fixed contract
25 fees, Deloitte also breached its contractual obligation to conduct parallel testing of the SAP
26 system's payroll components. Deloitte committed this breach with full knowledge that such
27 testing was essential to ensure that the new SAP system, after go-live, would be able to issue
2 Project timetable, hitting the go-live dates, and thereby collecting its fees -- rather than conducting
3 the kind of thorough testing critical for the Project. Deloitte's testing failures forced the County to
4 uncover and address software design, configuration and programming defects in the worst possible
7 89. Deloitte was responsible for leading the testing effort during the Project, and was
8 therefore in a position to know whether the new SAP system had been tested adequately and
- 9 performed properly prior to the go-live. Deloitte' s representations to the County conceming the
10 suitability of Deloitte's testing procedures and the artificially positive testing results were made
II with the knowledge of, or reckless indifference to, the fact that such representations were false.
12 The County relied upon Deloitte's misrepresentations and omissions concerning testing in
13 deciding to approve both the July 3 , 2006 and January 3 , 2007 go-live dates.
IS 90. Deloitte was responsible for preparing the County for the go-live of the new
16 SAP system and the shut-down of the legacy systems being replaced b y SAP. Deloitte was
17 contractually obligated to ensure that the County's end-users were adequately and appropriately
18 trained and self-sufficient in managing and using the SAP system to perform their jobs. Once
19 again, Deloitte breached these contractual obligations, and failed to deliver the reqwsite skills and
22 training programs were truncated with most lasting only a few hours, and were delivered only
23 weeks and, in some cases, only days before the go-live. Deloitte's flawed training left the
24 County's end-users with little time to develop even a basic familiarity with the complex new SAP
25 system, much less the proficiency required to use the system to perform their j obs, Moreover, it
26 was common practice for Deloitte to roll its consultants off the Project to work at other Deloitte
27 engagements, without engaging in any knowledge transfer, leaving the County's end-users to fend
28 for themselves.
o
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 92. In fact, the little training that Deloitte did perform did not fulfill Deloitte's
2 contractual obligation. The Agreement provided that end-users "shall be taught their individual
3 roles . . . from the context of the business process." This requirement stemmed [rom the County's .
4 desire.to have Deloitte, as the purported SAP expert, not only teach County employees how to
5 perform their individual roles and job tasks, but also to provide them with a full understanding of
6 how business processes flowed through the SAP system. During contract negotiations, the County
7 emphasized the need for such training to Deloitte, and insisted on including such training in the
8 SOW. Yet peloitte failed to deliver any process-based training prior to the Release I go-live. As
9 a result, the County's end-users were forced to leam how to use the SAP system in the worst
10 possible context - i. e., in a live production environment -- without having acquired the necessary
- .
12 93. Deloitte also departed from standard SAP implementation methodology and
13 practice by intentionally and/or recklessly failing to sufficiently document its designs and
14 configuration of the SAP system. Deloitte' s failure to appropriately document its work on the
15 Project exacerbated the County's difficulties foJlowing the go-Jive in identifying and attempting to
16 remedy the defects in the SAP system that Deloitte had designed, configured and implemented.
2
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 Unable to use the SAP system to perform its month-end and year-end closings, the County was
2 forced to perform such essential financial operations manually. It was not until November 2008 --
3 nearly a year and a half after the County's fiscal year ended -- that the financial statements for the
4 fiscal year ended June 30, 2007 were in a condition for the County's external auditors to begin
5 their audit. Those audited financial statements were not issued. until April 21, 2009.
6 96. The inability of the SAP system to produce financial statements also jeopardized
7 the County's relationships with its vendors, auditors, bond rating agencies, banks, and others in
8 the financial markets, and placed the County at risk in connection with borrowing rates and debt
9 issuances.
10 97. Other critical pieces of required functionality missing from the SAP system after
11 the go-live included 1 09 9 tax reporting functionality (which Deloitte simply failed to configure)
12 and grant management. Deloitte failed to assign any consultants to the Project with the
13 appropriate experience to implement the SAP Grant Management module. As a result, the County .
14 has been forced to resort to manual and time-intensive processes to participate in state and federal
16 98. In addition to these core defIciencies, other problems with the SAP system
17 following the Release I go-live included: (a) an improperly designed general ledger account
18 structure, which impaired the County's ability to manage its cash; (h) missing "positive pay"
19 functionality, which impaired the County's ability to guard against fraudulent check cashing; (c)
20 an incorrect configuration of the Fixed Assets module, which led to incorrect posting of
21 depreciation entries and impaired the County's ability to perform fixed asset accounting; (d) an
22 incorrect configuration of the Controlling module, which impaired the County's ability to provide
23 critical operational data to County management; (e) missing required treasury functionality,
24 including the Treasurer's Constant application, which prevented the County from performing cash
25 to fund reconciliations; (f) incomplete configuration of the Acco)lnts Payable module; (g) missing
26 functionality needed to generate billing documents from work orders; (h) missing functionality
27 necessary to generate W2 and quarterly taxes; and (i) double posting of inventory. Many of the
28
22
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
Release I financial components of the SAP system had to be re-designed and re-implemented after
3 99. Despite the severity of the problems with the Release I go-live, Deloitte insisted
4 on moving forward in accordance with the original timetable it had set. Deloitte did so
5 notwithstanding that the functionality required to implement the County's intricate HR and payroll
6 processes for Release II was even more complex, and required even more specialized SAP and
7 public sector skills, than Release 1. Yet instead of delaying Release II in order to focus its efforts
'
8 on fixing the SAP financial system and resolving Release I problems, Deloitte continued to pursue
9 its objective of hitting the January 2007 go-live date for Release II and collecting its fees. Deloitte
10 knew that proceeding with the original Release II go-live date posed grave risks to the County,
11 but, in conscious disregard of those risks, recommended that the County move forward as
12 scheduled.
13 100. Deloitte exacerbated those risks by failing to provide the County with
14 sufficiently skilled and experienced consultants for Release II, and shuffling its consultants on to
15 and off of the Release II effort. Deloitte also faile d to assign a separate proj ect manager for
16 Release II, an d instead relied on the same project manager who was unable t o address Release I
17 problems . .
18 101. As a result, many of the functionru specifications for Release II were delivered
19 late, and did not provide the functionality needed to process the County's complex HR and payroll
20 transactions. Certain of the functional specifications were received so late in the process that,
·21 given Deloitte's insistence o n hitting the original go-live date, there was no time left in the
22 schedule for its programmers to rely on the standard SAP programming language, ABAP. Instead,
23 the County was forced to develop workarounds to provide such functionality and, following the
24 go-live, to hire an SAP consultant who was able to write ABAP programs.
25 102. Despite these and other problems -- including that critical payroll tests were
26 failing -- Deloitte represented to County executive s that risks were being appropriately managed,
27 the implementation was on schedule and the SAP system would be ready to go live on the original
28 January 2007 date. Within hours after the Release II go-live, however, the SAP system began to
23
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 fail. Payroll discrepancies were especially ·crippling, as the County's payroll error rate increased
2 fIve-fold on the S AP system, compared to the County's legacy systems. Payroll problems became
3 so severe that the County was unable to rely on the SAP system for any of its payroll functions
5 103. Major defects and problems with the Release II components ofthe SAP system
6 included, among others: (a) incorrect calculation of County employee pay, including both
8 underpayments, overpayments and, in some cases, failure to make any payments; (c) inability to
9 generate crucial payroll and HR reporting; and Cd) deficiencies with time sheet reporting
10 fWlctionality, which enabled employees to record time worked in excess of the standard working
11 day.
12 104. Most of the work that Deloitte performed on Release II had to be re-designed,
13 re-tested and re-implemented by SAP experts, who confirmed that many of the problems were
14 caused by the Deloitte consultants' lack o f requisite SAP skills and experience. The SAP system
15 designed and configured by Deloitte included numerous extraneous fields that were not required
16 b y the County nor, for that matter, any public sector entity. To cite only one example, Deloitte
17 consultants set up profit center fields, which are irrelevant for a public sector entity. Further, in
18 designing and configuring the system, Deloitte consultants repeatedly failed t o utilize standard
20 105. The Deloitte consultants' inexperience with public sector accounting, SAP for
21 Public Sector software and overall incompetence resulted in an inefficient system plagued by
22 performance problems. Deloitte consultants defined and mapped unnecessary objects, which,
23 among other things, adversely affected reporting and other functions and degraded system
24 performance.
25 1 06. In or about early 2007, the County instituted a "Get Well" program to stabilize
26 the SAP system, and thereafter fired Deloitte. In addition to the County employees who worked
27 around the clock attempting to fix the SAP system's defects, the County also hired, at great
28 expense, SAP consultants and other independent contractors to assist in the remediation efforts.
24
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 Reflecting the severity of the problems, those remediation efforts continue to this day. The
2 diversion of County resources from their regular duties to SAP remediation efforts has long
3 strained the Auditor Controller's Office, the HR Departroent and the Employee Retirement
4 Association, among other County departments, in managing their affairs and providing services to
5 constituents.
6 107. While the remediation efforts have led to some improvements in the SAP
7 system, the County continues to contend with system performance issues, and it is clear that the
8 return on investment, cost savings and operational benefits expected from the SAP implementation
10 1 08 . To the contrary, the County has expended more than $30 million in connection
11 with the SAP implementation - millions of dollars over the Project budget -- and continues to
12 incur significant costs in its effort to stabilize and operate the defective SAP system designed and
13 implemented by Deloitte. Deloitte's misconduct has also exposed the County to potential liability
14 from third parties adversely impacted by the SAP system's failure to perform.
15 F. By Failing to Fulfill Its Role as the Systems Integrator and Concealing the_Severity
of Project Risks, Deloitte Engaged in Ongoing Fraud Throughout the Project
16
17 109. Deloitte knew that the Project had certain unique risks in light of, among other
18 things, the: (a) County's complex functional needs; (b) the fact that the County was an SAP
19 Ramp-Up customer; (c) the intricate interfaces required to integrate the SAP system with the
20 County's various non-SAP systems; (d) the County's complete lack of any prior ERP
21 implementation experience; (e) the County's total unfamiliarity with SAP software; (f) change
22 management and training challenges related to the County's highly decentralized organizational
23 structure; and (g) the aggressive implementation schedule. As a result, in its role as the systems
24 integrator, Delciitte was required to take steps to alert the County to risks and to adequately and
26 l l O. At various times during its performance on the Project, Deloitte knew, or should
27 have known, about critical risks that threatened to jeopardi�e or undermine the Project, and that
28 required the provision of skilled SAP and public sector resources and a readjustment in the
2
COUNTY OF MARIN'S COMPLAINT AGAINST DEWITTE CONSULTING LLP
1 implementation timetable. Deloitte had a duty to disclose such risks to the County, yet failed to do
2 so. For example, Deloitte: (i) knew about the following risks; (li) should have, but did not, alert
3 County management to such risks, and (iii) should have, but did not, take steps to manage and
18
(5 ) Deloitte failed to adequately and appropriately disclose to
19 the County prior to each go-live that its users were not
thoroughly or properly trained on the SAP system and
20 would not know how to use the system to perform their '
'
jobs; and
21
26 111. Even though Deloitte knew that the SAP system was not ready to be rolled oU.t
27 on the scheduled go-live dates, it concealed those facts from the County. Instead, days before the
28 scheduled Release I go-live, Deloitte's project manager, Steve Brooks, falsely represented and
26
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
I assured the County Administrator, Matthew Hymel, that the County should proceed with the go-
2 live, even though Mr. Brooks and other Deloitte executives, including the project director, Mr.
3 Seidenfeld, knew (or shoul d have known) that the system had not been fully tested and was not
4 correctly designed and configured . . In making this false representation, Mr. Brooks consciously
5 disregarded the risks to the County in proceeding with the go�live, and the harm to the County that
7 1 12. As the deadline for the Release II go-live approached, Mr. Brooks was
8 confronted by County team members and leads, Including Angie Hisanaga, who questioned
9 whether the SAP HR and payroll system was ready for production. Once again, Mr. Brooks
10 falsely represented and assured County ofiicials, including Mr. Hymel, that the SAP system was
·11 ready to. go live and could process the County's HR and payroll transactions. At the time he made
12 these representations, Mr. Brooks knew (or should have known) that the system was not ready for
13 production, and that testing was not only incomplete, but had indicated that tbe S AP system could
. .
14 not support the County's HR and payroll functions . Notwithstanding Deloitte's duty and
15 obligation to disclose these risks to the County, Mr. Brooks, and other Deloitte executives and
16 team leads, insisted on hitting the scheduled go-live dates so that Deloitte could obtain its fixed
17 contract fees and then continue to bill the County for "post-production" consulting services on a
19 1 13 . Had Deloitte advised County executives of the need to delay the go-lives dates
20 because the SAP system would be unable to operate the County's core business processes, the
21 County would have postponed the go-lives until such problems were resolved. Deloitte, however,
22 pursued its own agenda to achieve its own ends: collecting millions of dollars in fees, and usiilg
23 the County as a trial-and-error public sector training ground to enable its inexperienced
24 consultants to leam SAP for tbe Public Sector and to gain exposure to the new version of the ERP
26 1 14. . Because Deloitte knew that the defects it had failed to disclose would eventually
27 come to light and jeopardize its ability to obtain payment of its invoices, Deloitte also used the
28 County's project manager, Mr. Culver, to obtain sham "sign-off' documents purportedly
27
COUNTY O F MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
I approving work that Deloitte had not performed, not performed properly or had.been rejected by
2 other County employees. Even after Mr. Culver was no longer the project maoager, Deloitte
3 continued to·present him with the sham "sign-off' documents in arder ta secure payment of its
4 fees. Many of these documents not only lacked the requisite signatures, but were submitted to Mr.
5 Culver just as the Release II go-live was occurring, when the extent ofDeloitie's misconduct was
6 about to be revealed.
7 115. Deloitte' s misconduct concerning Mr: Culver not only breached its warranty to
8 perform in accordance with professional standards and the conflict-of-interest provision in the
9 Agreement, but also demonstrates Deloitte's pattern of willful misconduct and fraud in the
13 contemporaneously with the Project, Deloitte was, upon information and belief, engaging in a
14 pattern and practice of misconduct in connection with its SAP public sector implementation
15 practice.
16 1 1 7. p
Deloitte's SAP ublic sector implementation failures around the country have
17 been widely reported in the media. Several of these implementations occurred at the same time as
18 the Project. I n California, De10itte was the systems integrator on the problem-plagued project for
19 the Los Angeles Unified School District ("LAUSD"). In connection with that project, the press
20 has reported that the SAP system implemented by Deloitte overpaid and underpaid thousands of
21 LAUSD teachers millions of dollars, leaving many without any paychecks at all. Similar
22 implementation problems were experienced by the City of San Antonio, where media accounts
23 referred to the Deloitte SAP implementation as a "nightmare" which "prevented the [police] force
24 from receiving accurate paychecks" and resulted in "incorrectly managed personnel information."
25 More recently, media reports have also described implementation problems at the Miami-Dade
26 School District, which has fired Deloitte. One Miami-Dade official stated that paying Deloitte for
27 its inexperienced and unskilled consultants was like "pouring money into a black hole."
28
28
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 CLAIMS
3 contractual and other common law duties, negligence and/or gross negligence, the County suffered
4 substantial injuries in an amount to be determined by the trier of fact, but no less than $ 3 0 million.
9 120. The County repeats, reaJleges and incorpcrates the allegations contained in
11 121. A s set forth above, during the course o f its work on the MERIT Project, Deloitte
12 made numerous misrepresentations of material facts, and failed to disclose material facts,
13 regarding risks to the Project, the progress of its work, its services, its ability and intention to
14 correct problems with the Project, its ability and intention to fulfill its obligations as the
15 implementer and integrator of the public sector SAP system and the ability of the. designed SAP
17 122. Such representations made by Deloitte during the course ofits work on the
18 Project were false, and Deloitte knew, or was reckless in failing to know, that such statements
21 induce the County into permitting Deloitte to continue to purport to work and b e paid on the
22 Project, and the County reasonably relied upon Deloitte's material misrepresentations in
24 124. As a direct result ofDeloitte's fraud and deceit, the County sustained damages in
26 125. In addition, because Deloitte's actions were committed knowingly, willfully and
27 in conscious disregard of the rights of the County, the County is entitled to recover punitive
2
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 SECOND CAUSE OF ACTION
(Fraudulent Inducement of Contract)
2
3 126. The County repeats, realleges and incorporates the allegations contained in .
5 127. As set forth above, Deloitte made numerous misrepresentations of material facts,
6 and failed to disclose material facts, to the County regarding, among other things, its abilities,
7 resources, qualifications, credentials and intention to perform and provide services in connection
9 128. Such representations were false, and Deloitte knew, or was reckless in failing to
10 know, that such statements were false at the time they were made.
11 1 29. Deloitte also made promises during the discussions and negotiations leading up
12 to the Agreement between the parties with no intention of acting or delivering upon those
13 promises.
15 order to induce the County to enter into the Agreement, and the County reasonably relied upon
16 such misrepr�sentations and promises made by Deloitte in retaining Deloitte and entering into the
17 Agreement.
18 131. As a direct result of Deloitte' s fraud and deceit, the County sustained damages in
20 132. In addition, because Deloitte's actions were committed knowingly, willfully and
21 in conscious disregard of the rights orthe County, the County is entitled to recover punitive
25 133. The County repeats, realleges and incorporates the allegations contained ·in
27 134. By virtue of its self-proclaimed status as a purported expert in the field of SAP
30
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 public sector-skilled consultants, Deloitte owed the County a duty of care to provide the County
2 with accurate, truthful and complete infOimation regarding both the services to be provided by
4 1 35. Deloitte breached this duty by making representations to the County that were
5 materially false, incomplete or misleading at the time they were made, by failing to exercise
6 reasonable care and competence in obtaining and communicating information to the County and
7 by failing to ensure that the information it provided to the County was complete and accurate.
8 1 36. Deloitte was fully aware that the County had no experience in implementing an
9 SAP system, and knew that the County was depending and relying upon Deloitte to furnish the
10 superior knowledge, expertise and experience necessary for a successful public sector SAP
11 implementation. The County reasonably relied upon Deloitte's misrepresentations concerning its
13 1 37. Furthermore, following the Agreement betWeen the parties, Deloitte made
14 various material misrepresentations regarding the progress of its work on the Project, including its
15 services, its ability and intention to correct problems with the Project, its ability and intention to
16 fulfill its obligations as the implementer and integrator of the public sector SAP system and the
19 Deloitte to continue to perform on the Project and in approving the decisions to go-live with the
26
27
28
1
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 FOURTH CAUSE O F ACTION
(Breach of Contract)
2
3 141. The County repeats, realleges and incorporates the allegations contained in
5 142. The County entered into a valid, binding and enforceable contract with Deloitte.
6 143 . The County fulfilled its responsibilities under the terms of the contract with
7 Deloitte.
8 144. Deloitte unilaterally and materially breached its contract with the County.
9 145. As a direct result of Deloitte ' s material breaches of contract, the County
10 sustained damages in an amount to be determined by the trier of fact, but in an amount no less
12 146. In addition, because Deloitte's actions and mis�onduct were committed in bad
13 faith andlor intentionally, willfully and with reckless disregard of its consequences, and/or with
14 the knowledge, express or implied, that serious injury was a probable consequence of its conduct,
15 the County is entitled to recover indirect damages, including special, incidental, exemplary,
20 147. The County repeats, realleges and incorporates the allegations contained in
22 148. Deloitte agreed pursuant to an express warranty in the Agreement that its
23 consulting services, deliverables and work product would "be performed and completed . . . by
25 with all applicable laws, rules, regulations and ordinances, and in accordance with the professional
26 practices and standards adhered to by large nationally recognized providers of SAl' integration
27 services."
28
3
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 149. Delojtte further warranted that the result of its consulting services, work product
2 and deliverables would be "fully integrated and compatible with one another and the SAP
3 Software."
4 1 5 0. Deloitte �lso made various express and implied warranties in the Agreement as
5 to the quality, performance, cost, design, integration and consulting services it had contracted to
.
6 provide to the County .
7 151. Deloitte materially breached its express and implied warranties to the County.
10 1 53. In addition, because Deloitte's actions and misconduct were committed in bad
11 faith and/or intentionally, willfully and with reckless disregard of its consequences, and/or with
12 the knowledge, express or implied, that serious injury was a probable consequence of its conduct,
13 the County is entitled to recover indirect damages, including special, incidental, exemplary,
18 ] 54. 111e County repeats, rea1leges and incorporates the allegations contained in
21 integration services with respect to the Project, Deloitte assumed a duty of care to the County
22 required by its profession and in accordance with applicable professional standards, In the
23 alternative, Deloitte assumed a duty of ordinary care toward the County with respect to the
25 1 56. Deloitte failed to fulfill its duty of care toward the County by, among otller
26 things: (i) mismanaging the public sector SAP implementation and integration at the County; (ii)
27 · failing to staffthe Project with persons having sufficient experience and expeltise to perform the
28 professional servic,es required; (iii) failing to design, implement and integrate the new SAP system
.
33
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 properly and adequately; and (iv) failing to deliver accurate information to the County regarding
2 deficiencies in the system, the testing of the system and the curing of defects in the system.
6 willfully and with a conscious disregard of the rights of the County, the County is entitled to
8 PRAYER
9 WHEREFORE, the County of Marin respectfully requests that this Court enter judgment
14 (2) In the alternative, that the Court rescind the Agreement, and award the County
16 require Deloitte to return all fees and expenses pai d by the County to Deloitte
18 (3 ) In the alternative, awarding the County all fees and expenses paid by the County
19 to Deloitte;
22 (5) Awarding the County pre-judgment and post-judgment interest at the highest
24
25
26
27
28
34
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP
1 (6) Awarding the County such other and further relief, at law and in equity, to which
2 it may be entitled.
6
MARK P. RESSLER
7
R. TALI EPSTEIN
8 1633 Broadway
New York, New York 1 0 0 1 9
9 Telephone:(212) 506-1700
Facsimile: (2 1 2) 506- 1 800
10
[email protected]
[email protected]
:�c �
11
12
E cOUNSEL' COUNTY OF MARlN
13
14
21
Attorneys for Plaintiff
22 COUNTY OF MARIN
23
24
25
26
27
28
35
COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP