California ends Oracle licensing agreement

California has canceled the $95 million enterprise licensing agreement with Oracle Corp. that set off a firestorm of objections from legislators when it was announced last year.

Oracle Corp. of Redwood Shores, Calif., and Northrop Grumman Corp. of Los Angeles, agreed after two months of negotiations to rescind the deal and relieve the state of any further financial obligations, Attorney General Bill Lockyer said July 23.

Northrop Grumman's information technology unit proposed the deal to the state early last year, but Oracle signed the deal as the prime contractor and Northrop Grumman as the subcontractor, Oracle officials said.

Under the terms of the rescission agreement, California has no further financial obligations, including all associated interest and fees.

California paid Oracle $6.8 million for products and services through the enterprise licensing agreement before it was rescinded, said Nathan Barankin, a spokesman for the Attorney General's Office.

The attorney general's office could not be reached for additional financial details, but the San Jose Mercury News reported that the state will pay Oracle $3.6 million to get out of the contract.

The newspaper also reported that state officials retained the right to prosecute Oracle and Northrop Grumman for fraud if ongoing investigations reveal the companies broke the law in selling the software licenses.

The state's negotiating team included representatives from the Attorney General's Government Law Section, Department of General Services and the Department of Finance.

The deal caused an uproar in California earlier this year when it was discovered the officials in the administration of Gov. Gray Davis had awarded the contract without competition. This lead to an investigation by the state legislature, which led to the resignations of Barry Keane, director of the Department of General Services, Elias Cortez, state chief information officer, and Arun Baheti, state e-government director.

About the Author

William Welsh is a freelance writer covering IT and defense technology.

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