Marin County complaint against Deloitte Consulting on failed SAP project

SUPERIOR COURT OF CALIFORNIA County of Marin

-I [POCS@[Q) I MAY 28 2010 I

P.O. Box 4988 San Rafael, CA 94913-4988

KIM 1URNER, Court Executive Officer MARIN COID,Y SUPERIOR COURT

By: it. Main, Deputy

CASE NO. C f V /0 () 2 rz 7 NOTICE OF CASE

MANAGEMENT CONFERENCE (CIVIL)

This case is subject to the Trial Court Delay Redu ·ibn 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�ia Rules of Court 3.734, this case is assigned to Judge h'W Department . This assignment is for all purposes.

MCSC Civil Rule 1.18 and CRC 3.11 O(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.

1. IT IS ORDERED that the parties/counsel to this action shall:

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 Ruse hearing on the dates set forth below:

Hearing on Failure to File Proof of Service 8 / /D / /D 8:30 /}#im A.M.

Hearing on Failure to Answer � / D / 10 8:30 / � A.M.

I () / 1'1 / /.1'1 b. Appear for a Case Management Conference on rx rx U 8:30 / � A.M.

2. Telephonic appearance at Case Management Conference may be available by contacting COURT CALL, an independent vendor, not less than 5 court days before the hearing date. Parties may make arrangements by calling (888) 882-6878. This service is subject to charges by the vendor.

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.)

Case Management Statement must be filed by /{) / tb / 10 5. All Law and Motion matters will be heard on the calendar of the assigned Judge. Tentative Rulings

are available online b y 2:00 p.m. on the weekday preceding the hearing date at http://www.marincourt.org/CiviUentative.htm. If you need to make other arrangements, please call (415) 444-7170.

cvoos NOTICE OF CASE MANAGEMENT CONFERENCE (CIVIL) Rev. 2/10

I

ATTORNEY OR PARTYWTTHQUT ATTORNEY (Name, State Barnumber, and address):

Patrick K. Faulkner, County Counsel (SBN 070801) Sheila Shah Lichtblau, Deputy County Counse l (SBN 167999) 3501 Civic Center Dr., Rm. 275, San Rafael CA 94903 TELEPHONE NO. (415) 499-6117 FAX NO .• (415) 499-3796

• ATTORNEY FOR (N a me) : County of Marin

SUPERIOR COURT OF CALIFORNIA, COUNTY OF MARIN STREET ADDRESS: 3501 Civic Center Drive

MAILING ADDRESS; P.O. Box 4988

CITY AND ZIP CODE: San Rafael CA 94913

BRANCH NAME

CASE NAME: County of Marin v. Deloitte Consulting UP

CM-010 FOR COURT USE ONLY

CIVIL CASE COVER SHEET Complex Case Designation "CN-y;UMB:"i 1. 0 0 2 7"8' . 7 [XJ Unlimited D Limited D V D Counter Joinder '-;;'�F--------------i (Amount (Amount , JUDGE

demanded demanded is Filed with first appearance by defendant JAIv1ES R. RITCHIE exceeds $25,000) $25,000 or less) (Cal. Rules of Court, rule 3.402) DEPT.

Items .1-6 below must be camp et (see instructions on page 2) . . 1. Check one box below for the case type that best describes this case:

Auto Tort

D Auto (22)

D Uninsured motorist (46)

Other pl/PDmO (Personal lnjury/Property Damage/Wrongful Death) Tort

'

D Asbestos (04)

D Product liability (24)

D D

Medical malpractice (45)

Other PI/PDNVD (23)

Non·PI/PD/WD (other) Tort

D Business tort/unfair business practice (07)

D Civil rights (08)

D Defamation (13)

[XJ Fraud (16)

D Intellectual property (19)

Contract D Breach o(contractlwarranty (06)

D Rule 3.740 collections (09)

D Other collections (09)

D D

Insurance coverage (18)

Other contract (37)

Real Property D Eminent domain/Inverse condemnation (14)

D D

Wrongful eviction (33)

Other real property (26)

Unlawful Detainer

D Commercial (31)

D Residential (32)

D Drugs (38)

D Professional negligence (25) Judicial Review

D Other non-PI/PDNVD tort (35) D Asset forfeiture (05)

Employment D Petition re: arbitration award (11)

D Wrongful termination (36) D Writ of mandate (02)

D Other employment (15) Other judicial review (39)

Provisionally Complex Civil Litigation (Cal. Rules of Court, rules 3.400-3.403)

D AntitrustfTrade regulation (03)

D Construction defect (10)

D Mass Iort (40)

D Securities litigation (28)

D EnvironmentalfToxic tort (30)

D Insurance coverage claims arising from.the above listed provisionally complex case types (41)

Enforcement of Judgment

D Enforcement of judgment (20)

Miscellaneous Civil Complaint

D RICO (27)

D Other complaint (not spedfied above) (42)

Miscellaneous Civil Petition

D Partnership and corporate governance (21) D Other petition (not specified above) (43)

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

issues that will be time-consuming to resolve

Substantial amount of documentary evidence

e. D Coordination with related actions pending in one or more courts

in other counties, states, or countries, or in a federal court c. [XJ f. D Substantial post judgment 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 [XJ is not a class action suit

6. If there are allY knowllieJated cases, file and serve a notice of related case. �(y;ou � CM-015 .. )

Date: May L�, 2u 0 . .

Sheila S. Lichtblau � (TYPE OR PRINT NAME) ARI Y WAr loRNE9 ,""OR PARI9j

NOTICE • Plaintiff must file this cover sheet with the first paper filed in the action or proceedinQ (except small claims cases or cases filed

under the Probate Code, Family Code, or Welfare and Institutions Code). (Cal. Rules of Court, rule 3.220.) Failure to file may result in sanctions.

• File this cover sheet in addition to any cover sheet required by local court rule. • If this case is complex under rule 3.400 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.

Form Adopted for Mandatory Use Judicial Council of Califomla CM-010 [Rev. July 1, 2007]

CIVIL CASE COVER SHEET Cal Rules of Court, rUles 2.30, 3.220, 3.40().....3.403, 3.740; Cal. Standards of Judicial Ad=��i?Aih?J�itik�

erican LegalNet, tnc . . FormsWorl</fow.co

SUM-100

SUMMONS fCITACION JUDICIAL)

NOTICE TO DEFENDANT:

(A VIsa AL DEMANDADO): DELOITTE CONSULTING LLP

FOR COURT USE ONL Y (SOLO PARA usa DE LA CORTE)

MAY 2 8 2010 YOU ARE BEING SUED BY PLAINTIFF:

(La ESTA DEMANDANDO EL DEMANDANTE): KIM WRNER. Court Executive Officer

MARIN COID;TY SUPERIOR COURT By: K. Main, Depury

COUNTY OF MARIN

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 case. There may be a court form that you can use for your response. You can find these court forms and more information at the California Courts Online Self-Help Center (\IV\IVVV. coutrinfo. ca. gov/selfhelp), your county law library, or the courthouse nearest you. If you cannot pay the filing fee, ask the court clerk for a fee waiver form. If you do not file your response on time, you may lose the case by default, and your wages, money, and property may be taken without further warning from the court.

There are other legal requirements. You may want to call an attorney right away. If you do not know an attorney, you may want to call an attorney referral service. If you cannot afford an attorney, you may be eligible for free legal services from a nonprofit legal services program. You can locate these nonprofit groups at the California Legal SelVices Web site (\f1MIW./awhelpcalifomia.orq), the California Courts Online Self-Help Center (WVV\tV.courtinfo.ca.qov/selfhelpJ. or by contacting your local court or county bar association. NOTE: The court has a statutory lien for waived fees and costs on any settlement or arbitration award of $10,000 or more in a civil case. The court's lien must be paid before the court will dismiss the case. jA VISO! Lo han demandado. Si no responde dentm de 30 dias, la corte puede decidiren su contra sin escuchar su versiOn. Lea la informaci6n a

continuaci6r). . 7/ene 30 DIAS DE CALENDARIO despues de que Ie entreguen esta citaci6n y pape/es legales para presentar una respuesta por escrito en esta corte y hacer que se entregue una copia al demandante. Una carta 0 una lIamada feletonica no 10 pIDtegen. Su respuesta por escrito fiene que �staren formato legal correcto si desea que procesen su caso en la corte. Es posib/e que haya un formulario que usted pueda usar para su respuesta. Puede encontrar estos formularios de /a corte y mas infOlmaci6n en el Centro de Ayuda de las Cortes de Califomia . (www.sucorte.ca.gov). en labiblioteca de leyes de su condado 0 en la corte que Ie quede mas cerea. Si no puede pagarla cuota de presentacion, pida al secretario de la corte que Ie de un formulario de exenci6n de pago de cuotas. Si no presenta su respuesta a fiempo, puede perder el caso por incumplimiento y la corte Ie podra quitar su sueldo, dinero y bienes sin mas advertencia.

Hay otrDS requisitos legales. Es recomendablr; que lIame a un abogado inmediatamente. Si no conace a un abogado, puede /lamar a un seNicio de remisi6n a abogados. Si no puede pagar a un abogado, es posible que cumpla con los requisITos para obtener servicios legales gratuitos de un programa de servidos legales sin fines de lUCID. Puede encontrar estos grupos sin fines de lUCID en el sifio web de California Legal Services, (WVIIW.lawhelpcalifomia.orgJ, en el Centro de Ayuda de las Cortes de California, (wNw.sucorte.ca.gov) 0 poniendose en contacto con la corte 0 el co/egio de abogados locales. AVISO: Por ley, la corte tiene derecho a reclamarlas cuotas y los costas exentos por imponer un gravamen sobre cualquier recuperaci6n de $10,000 6 mas de valor recibida mediante un acuerdo a una conces;6n de arbitraje en un caso de derecho civil. Tiene que pagarel gravamen de /a corte antes de que la corte pueda desecharel caso.

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 DATE: MAY 2 82010 l1,TTh JJ IT ",:-l\,F�""' Clerk, by, (Fecha) l'UJ.V.l U-,-u'lD.1(, (Secretano)

(415) 499-6117 • '"" hW'l.IM. . �

(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):

'3. c::J on behalf of (specify): DELOITTE CONSULTING LLP

, Deputy (Adjunto)

under. D CCP 416,10 (corporation) D CCP 416.20 (defunct corporation)

D CCP 416,60 (minor) D CCP416,70(conservatee) D CCP 416.90 (authorized person)

Form Adopted for Mandatory Use JudiCial Council of California SUM-100 [Rev. July 1, 2009]

� CCP 416.40 (association or partnership)

D other (specify): 4, D by personal delivery on (date):

SUMMONS

Page 1 of1 Code of Ovil Procedure §§ 412.20, 465

www_courtintocB_OOV

I American LegalNet, Inc I . WIMN Forms workllbw m .

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MARK P. RESSLER (pro hac vice application to be submitted) R. TALI EPSTEIN (pro hac vice application to be submitted) KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Facsimile: (212) 506-1800 [email protected] [email protected]

PATRICKK. FAULKNER (SBN 070801) . County Counsel SHEILA SHAH LlCHTBLAU (SBN 167999) Deputy County Counsel 3501 Civic Center Drive, Room 275 San Rafael, California 94903 Telephone: (415) 499-6117 Facsimile: (415) 499:3796 [email protected] [email protected]

Attorneys for Plaintiff COUNTY OF MARIN

SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF MARIN

COUNTY OF MARIN, Case No. t::rV� 0 0 2 18 7

Plaintiff,

v. COMPLAINT FOR DAMAGES DELOlTTE CONSULTING LLP,

Defendant.

23 Plaintiff the County of Marin (the "County"), for its complaint against Deloitte Consulting

24 LLP ("Deloitte"), alleges as follows:

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

28 multi-million dollar software implementation contract with Deloitte.

COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP

1 2. In 2004, after commissioning a detailed evaluation and conducting a rigorous

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

4 an enterprise resource planning ("ERP") software system.

5 3. Given the extrao,dinary operational risks in 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·

9 successful ERP implementation.

1 0 4. Seizing upon the County's decision, Deloitte moimted an extensive sales ,

1 1 campaign to be hired by the County. As part of its sales efforts, Deloitte repeatedly represented to

1 2 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,

1 4 developed and licensed by SAP A G and SAP America, Inc. ("SAP for Public Sector"). Deloitte

1 5 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,

1 8 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

2 1 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

23 contract for the County's lucrative SAP project.

24 6. In April 2005, in reliance upon Deloitte's misrepresentations, the County hired

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.

COUNTY OF MARIN'S COMPLAINT AGAINST DEWITTE CONSULTING LLP

1 7. Moreover, in its two years of work on the project, Deloitte engaged in a

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

9 prior to the go-live.

1 0 8. All the while, Deloitte continued to invoice the County, collecting more than $11

1 1 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

1 3 would not be able to meet the County's most basic functional requirements, and would in fact

1 4 prevent the County from perfonning essential daily operations.

15 9. The result of Deloitte' s misconduct was a defectively designed, deficiently

1 6 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

1 8 nearly two years, the County was saddled with a costly computer system far worse than the legacy

1 9 systems it was intended to replace.

. 20 10 . To date, nearly four years after the initial go-live of the SAP system that Deloitte

21 designed and implemented, the County continues to struggle with ongoing performance problems,

22 functionality limitations and other crippling defects. Deloitte, on the other hand, has pocketed

23 millions of dolJars in consulting fees, notwithstanding its fraudulent misrepresentations and

24 egregious perfonnance failures.

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 pro blem-p lagued

27

28

3 COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE 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

4 that Deloitte inflicted on the County, as well as punitive damages.

5 THE PARTIES

6

7

13.

14.

Plaintiff County is a political subdivision of the State of California.

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

1 1 accountancy and professional services firms.

12 JURISDICTION AND VENUE

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

19· and venue of all actions related to the contract.

20

21 A.

22

FACTS

The County's Operations and Decision to Implement an ERP System

17. The County is one of nine northern California Bay Area counties located ·across

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


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

5 also provides retirement benefits to pensioners.

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

9 payable, budget preparation, vendor management, benefits administration, purchasing, payroll,"

10 position contro I and fixed assets,

II 20. In February 2003, the County commissioned the Government Finance Officers

12 Association (the "GFOA") to perform a thorough evaluation ofthe County's financial

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

" 16 dependent on manual, time-consuming processes.

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

1 9 AMS software product used by the County.

20 22. Accordingly, in 2004, to improve internal operational efficiency and its ability to

21 serve its constituents, the County decided to replace it aging financial management, payroll and

22 HR systems with an ERP system that would integrate the activities of all County departments on a

23 single, unified software platform (the "Project"). The Project to implement the ERP system at the

24 County was referred to as MERIT ("Marin Enterprise Resource Integrated Technology")'

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, the County intended to obtain an


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

J I 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 consultants assigned, the County pursued a rigorous systems 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

1 7 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

1 9 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

25 associated with the implementation of a new software system (a phase of software'

26 inlplementations known as "change management"); (ii) developing a robust training program to

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


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,

6 and Deloitte knew it was false at the time it made it

7 B.

8

9

Deloitte's Campaign to Land the ERP Implementation Contract by Misrepresenting its SAP Public Sector Skills and Exp.erience to the County

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 with 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.

1 3 31. Throughout the months-long selection process, County officials stressed to

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

24 experience," "exceptional government skills" and "proven methods," including implementation

25 methodologies, change management and project management skills, for successfully implementing

26 the SAP for Public Sector software.

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 [its 1 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

8 perform properly in what Deloitte acknowledged were "highly sensitive" areas.

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

1 1 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.

1 5 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

17 would ensure a complete and thorough knowledge transfer.

18 38. In a written response, dated November 6, 2 004, Deloitte acknowledged the

19 County's need for more robust change management and proposed a "richer change management

20 approach with a stronger emphasis on change management as a whole," including a "capability

21 transfer" program·that would ensure that County Project tearn members acquired "all the 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."

25 40. In addition to the foregoing representations contained in its written submissions,

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


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officials and employees, including, among others, Matthew Hymel, Heather Burton and Katie

Geier, likewise related to Deloitte's purported: SAP project management and change management

skills, experience and expertise; implementation methodologies; and understanding of the SAP for

Public Sector software solution in general, and the SAP for Public Sector sof1ware as it would have

to be configured to meet the unique needs and requirements of th e Comity and be integrated with

other components of the County's information systems.

4 1 . Concerning Deloitte' s purported skills, experience and expertise in SAP, its

qualifications to act as the systems integrator and project manager on the Project and its

commitment to the County, the false and misleading representations Deloitte made to the County

during the summer and fall of 2004, including in its RFP response, dated June 7, 2004 and at on

site presentations at the County on or about September 16, 2004 and November 12, 2004, included,

among others, the following: .

(a) " ... we are uniquely qualified in our understanding of county issues and

challenges ... "

(b)

(c)

(d)

(e)

(f)

(g)

(h)

" ... deep experience with SAP implementations for state and local

government."

"[W]e have assembled a highly skilled and experienced public sector

knowledgeable proj ect team to work with you."

"[Wle provide experienced consultants who have both breadth across SAP

modules and depth within SAP modules combined with implementation

experience in public sector organizations."

"[A] seasoned team with deep SAP, public sector .and functional

experience. "

"The breadth of our capability and our understanding of the County is

unmatched."

"Commitment to dedicate our best resources and bring tailored

implementation strategies to meet your long-term needs." .

"Deep bench strength."


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(i)

G)

(k)

(1)

"An experienced team that has worked to gether before."

"Every one of [our North American] installations is a solid client reference."

. "Among Deloitte Consulting'S greatest strengths is the inteiP:ation of all

aspects of ERP implementations."

"To meet the needs of public sector clients, we are able to draw upon the

experience of a full range of public sector specialists in every area"

7 (m) "Deloitte Consulting is absolutely committed to the success of this project."

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.

13 43 . After months of evaluation, including software demonstrations and presentations

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

21 ensure the Success of the County's SAP implementation.

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'

7 written contract (collectively, the "Agreement").

8 C.

9

Deloitte's Obligations and Liability Under the Governing Contracts

46. Under the ISA, Deloitte was responsible for the "planning, validation,

10 development, implementation, configuration, customization and tuning of a comprehensive, fully-

1 1 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

1 3 Requirements Matrix that was appended to the SOW.

1 4 47. In performing these services, Deloitte further obligated itself to implement

1 5 "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 in such a way as to provide the County will all of the functionality it required.

1 8 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."

2 1 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

23 ("ASAP'� and Deloitte's own proprietary repository management tool ("ThreadManagerTM")

24 throughout the course of the Project; (iii) provide change management and training services; and

25 (iv) manage the Project to completion.

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 8 personnel, in a timely, professional, work-person-like manner" i n accordance with SAP integration

COUNTY OF MARIN'S COMPLAINT AGAINSTDELOITTE CONSULTING LLP

1 services practices and standards.

2 50. As detailed below, Deloitte materially breached the Agreement and express

3 warranty by, among other things:

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(a)

(b)

failing to implement an SAP system that met the County's needs, much less

could deliver the required functionality;

failing to use best practices for govenunent organizations consistent with

those of nationally recognized SAP software implementers;

(c) . failing to provide Project leadership by, among other things, failing to

(d)

(e)

(f)

(g)

(h)

disclose and communicate critical Project risks to the County;

failing to utilize the ASAP methodology, or consistently use

ThreadManager TM;

failing to fulfill its change management obligations;

failing to competently manage risks encount ered in connection with its

services on the Proj ect;

failing to perform the required software testing; and

failing to provide the required training and knowledge transfer to the

County's Project team.

Deloitte's misconduct on the Project was notlimited to the above performance

1 9 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

23 of a scheme to conceal risks on the Project from County executives.

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

27 the County that Deloitte knew is described more fully below.

28


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

6 the new SAP system by January 3, 2007 ("Release II").

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 on 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 in SAP for Public Sector, SAP

12 in general, project management and change management; (ii) lacked a close relationship with the

1 3 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

I S with the County's other software applications.

16 56. As set forth below, Deloitte' s work on, and management of, the Project was

1 7 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 public 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

26 went live in an actual production environment.

27

28


1

2

3 57.

(a) Deloitte's Flawed Blueprinting, Design and Configuration of the SAP System Doomed the Project

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

6 of an SAP software solution (the "to be" processes).

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

9 SAP system in conformity therewith.

10 59. Another crucial focus of the blueprinting phase is to identify and map the

1 1 required interfaces between the SAP system and a client's other software systems that will need to

1 2 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

14 · team to write software code to build the interfaces.

15 60. Inyomplete and improper identification, definition and mapping of business

1 6 processes and interfaces during the blueprinting phase, if not corrected early in the implementation

17 schedule, results in an SAP system that is improperly configured and coded, and that will therefore

18 b e unable to perform necessary business functions .

19 6 1 . . 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

22 programs that were supposed to provide the required functionality.

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,


1 SAP for Public Sector best practices.

2 - (b) The Revolving Door of Inexperienced Deloitte Personnel

3 63. Deloitte's pre-contract representations to the County concerning·Deloitte's

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

9 source and assign such consultants to the Project.

1 0 64. Contrary to Deloitte's pre-contract representations touting its purported

11 expertise, few of 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,

13 they were incompetent.

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 team members attended. Because the Deloitte consultants

17 were learning the SAP software alongside the County Proj ect team members, Deloitte was utterly

1 8 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 of SAP'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

25 components of the implementation.

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.

6 69. Contrary to Deloitte's pre-contract representations, the consultants Deloitte

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

' 1 0 neophyte consultants, many of whom lacked even a basic understanding of SAP.

1 1 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

1 3 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

1 5 Project.

1 6 71. Moreover, throughout the design and implementation, Deloitte constantly

1 7 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

1 9 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

1 6 COUNTY OF MARlN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP

1

2

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installation in the first place, and then aggravated that problem through its reassignment practices.

(c) Deloitte Persuaded the County to Become a "Ramp-Up" Customer Without Advisiug of the Attendant Increased Risks

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

1 0 would provide flexibility and scalability that could not b e achieved by implementing the version

1 1 of the software that the County had originally licensed.

1 2 75. Based on Deloitte's representations, the County agreed to be a Ramp-Up

13 customer. At the time it made this decision, however, the County was unaware of the increased

14 risks posed by implementing a brand new SAP software product. Deloitte was aware of these

1 5 risks, but failed to advise the County of them. Nor did Deloitte readjust the Project timelines, or

1 6 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

1 8 worked, much less implemented in a live production environment.

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,

2 1 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

1 7 COUNTY OF 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,

6 coding errors and missing and deficient functionality.

7 Cd) Deloitte's Failure to Test the System Adequately

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

1 0 deficiencies, Deloitte failed to follow standard testing protocol, including the design and

1 I development oftesting scripts that wonld detect bugs in the system and other design flaws.

1 2 80. Deloitte also failed to test the kind and quantity of data transactions needed to

1 3 replicate accurately the reality of the County's financial, HR or payroll operations.

1 4 8 1 . Delays i n Deloitte' s preparation of design and configuration documents also

1 5 resulted in a highly compressed testing schedule. Some functionality was not tested at all because

1 6 Deloitte continued to work on the SAP system right up until the go-live.

1 7 82. Deloitte also deliberately "under-tested" the system to conceal defects and keep

1 8 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

26 with non-SAP systems could not be properly validated.

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 from 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

I I 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 of 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

I S the SAP system and the other systems, problems might lurk. Indeed, it was a Deloitte practice

1 6 during the testing phase to "mock-up" the test data when tests hit a "fail point" so that it could

1 7 bypass the failed stage and allow the test to continue to run to completion, without ever fixing the

1 8 problems. As it happened, many of the "negative scenarios" that Deloitte did not test were

1 9 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

23 and process full transaction volumes.

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

, 28 accurate paychecks to County employees.


I 88. Throughout the testing phase, Deloitte's concern focused on sticking to the

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

5 context -- in a live production environment -- rather than in a controlled test environment, as

6 required by basic SAP best practices.

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

1 0 suitability of Deloitte's testing procedures and the artificially positive testing results were made

I I 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

1 3 deciding to approve both the July 3, 2006 and January 3 , 2007 go-live dates.

14 (e) Deloitte's Failure to Conduct the Required Traiuing

I S 90. Deloitte was responsible for preparing the County for the go-live of the new

1 6 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

1 8 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

20 experience in SAP for Public Sector training.

2 1 91 . Specifically, Deloitte failed to develop an adequate training plan. As a result,

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

1 0 possible context -- . i. e., in a live production environment -- without having acquired the necessary

1 1 knowledge and skiJls.

12 93. Deloitte also departed from standard SAP implementation methodology and

1 3 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

1 5 Project exacerbated the County's difficulties foJlowing the go-Jive in identifying and attempting to

1 6 remedy the defects in the SAP system that Deloitte had designed, configured and implemented.

1 7 E.

1 8

The Defects and Deficiencies in the SAP System Caused by Deloitte's Lack of Necessary Skills and Expel'ience, and Its Substandard Design, Configuration, Testing and Project Management

1 9

20

2 1

22

23

24

25

94. On July 3, 2006, the County's core financial operations (Release I) went live on

SAP. Almost immediately, the new SAP system began experiencing significant cash

reconciliation and financial posting issues, imd was unable to accurately account for and track the

County's flow of funds. Contrary to its contractual obligations,.Deloitte failed to design and

implement a funds management system within SAP capable oftracking cash to its funding source

throughout the clearing process.

95 . As a result of these cash reconciliation and posting issues -- and Deloitte's

26 . failure to properly design the County's chart of accounts -- the County lacked even the most basic

27

28

financial reporting capabilities. In fact, the County could not rely on the new SAP system to

produce a simple balance sheet, much less required federal and state year-end financial reports.


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

1 1 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

15 funded grant programs.

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 depreciati on 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


Release I financial components of the SAP system had to be re-designed and re-implemented after

2 Deloitte' s departure from the Proj ect

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,

1 1 but, in conscious disregard of those risks, recommended that the County move forward as

1 2 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

1 5 and off of the Release II effort. Deloitte also faile d to assign a separate proj ect manager for

16 Release II, and instead relied on the same project manager who was unable to address Release I

1 7 problems . .

1 8 1 0 1 . 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,

· 2 1 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


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

4 and had to perform the work manually.

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

7 underpayments and overpayments; (b) incorrect calculation of retirement benefits, including

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

1 0 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,

1 3 re-tested and re-implemented by SAP experts, who confirmed that many of the problems were

1 4 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 to utilize standard

19 settings available in the SAP software.

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.


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

9 -- and reflected in the Agreement -- will not be achieved.

10 1 08 . To the contrary, the County has expended more than $30 million in connection

1 1 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.

1 5 F.

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17

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

109. Deloitte knew that the Project had certain unique risks in light of, among other

1 8 things, the: (a) County's complex functional needs; (b) the fact that the County was an SAP

1 9 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

25 appropriately mitigate and manage them.

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

4 'mitigate such risks:

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Deloitte failed to adequately and appropriately disclose to the County, during the pre-contract stage or at any time during the Project, that Deloitte did not have, and had no intention of staffing the Project with, the necessary skills, experience and resources to perfonn its work on the Project, including its work in the design, testing, configuration, programming, change management and training areas, 'among others;

Deloitte failed to adequately and appropriately disclose to the County that the SAP system it was implementing for the County had not been thoroughly or sufficiently tested;

Deloitte failed to adequately and appropriately disclose to the County that the test data and test scripts for the SAP system were not valid or reliable indicators bf the system's performance in production;

Deloitte failed to adequately and appropriately disclose to the County that Deloitte would not be able to properly design and test the SAP software to meet the County's functional requirements and in the required time frame;

Deloitte failed to adequately and appropriately disclose to the County prior to each go-live that its users were not thoroughly or properly trained on the SAP system and would not know how to use the system to perform their ' jobs; and

'

Deloitte failed to adequately and appropriately disclose the risks 'to the County stemming the fact that the COU.t1ty was an SAP Ramp-Up customer, and failed to adjust the implementation schedule to account for these risks and for the fact that its consultants lacked the necessary experience and familiarity with the new version of the SAP software:

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

2 8 scheduled Release I go-live, Deloitte's project manager, Steve Brooks, falsely represented and


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 should 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

6 was likely to (and did) ensue.

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

· 1 1 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

1 6 team leads, insisted on hitting the scheduled go-live dates so that Deloitte could obtain its fixed

1 7 contract fees and then continue to bill the County for "post-production" consulting services on a

18 time and materials basis.

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

25 2005 SAP software .

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


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

10 performance of the Project.

1 1 G.

12

Deloitte's Pattern and Practice of Deficient Performance

1 1 6. Unbeknownst to the County, at the time it retained Deloitte, and

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 17. Deloitte's SAP public sector implementation failures around the country have

1 7 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


1

2 1 1 8.

CLAIMS

As a result of Deloitte's fraud, willful misconduct, bad faith, breach of

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 $30 million.

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1 19. All conditions precedent to the County's entitlement to recover on its .claims

herein have been performed, have occurred or have been waived.

120.

FIRST CAUSE OF ACTION (Fraudulent Pelformance of Contract)

The County repeats, reaJleges and incorpcrates the allegations contained in

1 0 paragraphs 1 through 1 19 as if fully set forth herein.

1 1 121. As set forth above, during the course of its work on the MERIT Project, Deloitte

1 2 made numerous misrepresentations of material facts, and failed to disclose material facts,

1 3 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

1 5 implementer and integrator of the public sector SAP system and the ability of the. designed SAP

1 6 system to perform as required.

17 122. Such representations made by Deloitte during the course of its work on the

1 8 Project were false, and Deloitte knew, or was reckless in failing to know, that such statements

1 9 were false at the time they were made.

20 123. Such misrepresentations and concealments were made by Deloitte in order to

2 1 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

23 . permitting Deloitte to do so.

24 124. As a direct result ofDeloitte's fraud and deceit, the County sustained damages in

25 an amount to be determined by the trier of fact.

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

28 damages in an amount to be determined by the trier of fact.


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3 126.

SECOND CAUSE OF ACTION (Fraudulent Inducement of Contract)

The County repeats, realleges and incorporates the allegations contained in .

4 paragraphs 1 through 125 as if fully set forth herein.

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

8 with the implementation of SAP software at the County.

9 128. Such representations were false, and Deloitte knew, or was reckless in failing to

1 0 know, that such statements were false at the time they were made.

1 1 1 29. Deloitte also made promises during the discussions and negotiations leading up

1 2 to the Agreement between the parties with no intention of acting or delivering upon those

1 3 promises.

1 4 1 30. Such misrepresentations and promises by Deloitte were made wrongfully in

1 5 order to induce the County to enter into the Agreement, and the County reasonably relied upon

1 6 such misrepr�sentations and promises made by Deloitte in retaining Deloitte and entering into the

1 7 Agreement.

1 8 1 3 1 . As a direct result of Deloitte' s fraud and deceit, the County sustained damages in

19 an amount to b e determined b y the trier o f fact

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132. In addition, because Deloitte's actions were committed knowingly, willfully and

in conscious disregard of the rights orthe County, the County is entitled to recover punitive

damages in an amount to be determined by the trier of fuct

133.

nURD CAUSE OF ACTION (Negligent Misrepresentation)

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

28 systems consulting, implementation and integration, and especially as a provider of experienced


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

3 Deloitte and Deloitte's qualifications and abilities to provide such services.

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

1 1 implementation. The County reasonably relied upon Deloitte's misrepresentations concerning its

12 expeliise and experience in entering into the Agreement.

1 3 1 37. Furthermore, following the Agreement betWeen the parties, Deloitte made

1 4 various material misrepresentations regarding the progress of its work on the Project, including its

1 5 services, its ability and intention to correct problems with the Project, its ability and intention to

1 6 fulfill its obligations as the implementer and integrator of the public sector SAP system and the

17 ability of the designed public sector SAP system to perform as required.

18 1 38. The County reasonably relied uponDeloitte's misrepresentations in permitting

1 9 Deloitte to continue to perform on the Project and in approving the decisions to go-live with the

20 SAP system for Release I and Release II.

21 1 39. As a direct result of Deloitte's negligent misrepresentations, the County

22 sustained damages in an amount to be determined by the trier of fact.

23 140. In addition, because Deloitte's acts of negligent misrepresentation constitute

24 gross negligence, the County is entitled to recover punitive damages in an amount to be

25 determined by the trier of fact.

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3 141 .

FOURTH CAUSE OF ACTION (Breach of Contract)

The County repeats, realleges and incorporates the allegations contained in


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143 .

The County entered into a valid, binding and enforceable contract with Deloitte.

The County fulfilled its responsibilities under the terms of the contract with

7 Deloitte.

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144.

145.

Deloitte unilaterally and materially breached its contract with the County.

As a direct result of Deloitte's material breaches of contract, the County

1 0 sustained damages in an amount to be determined by the trier of fact, but in an amount no less

1 1 than $30 million.

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146. In addition, because Deloitte's actions and mis�onduct were committed in bad

faith andlor intentionally, willfully and with reckless disregard of its consequences, and/or with

the knowledge, express or implied, that serious injury was a probable consequence of its conduct,

the County is entitled to recover indirect damages, including special, incidental, exemplary,

consequential, punitive, or other indirect damages, indirect losses, or indirect expenses, as

provided by Section 12.4 of the ISA.

147.

FIFTH CAUSE OF ACTION (Breach of Express and Implied Warranty)

The County repeats, realleges and incorporates the allegations contained in

2 1 paragraphs 1 through 146 as if fully set forth herein.

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

24 competent, qualified personnel, in a timely, professional, work-person-like manner, in compliance

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."

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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."

4 150. 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 . .

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152.

Deloitte materially breached its express and implied warranties to the County.

As a direct consequence ofDeloitte's breach of express and implied warranties,

9 the. County sustained damages in an amount to be determined by the trier of fact.

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153. In addition, because Deloitte's actions and misconduct were committed in bad

faith and/or intentionally, willfully and with reckless disregard of its consequences, and/or with

the knowledge, express or implied, that serious injury was a probable consequence of its conduct,

the County is entitled to recover indirect damages, including special, incidental, exemplary,

consequential, punitive, or other indirect damages, indirect losses,. or indirect expenses, as

provided by Section 12.4 of the ISA.

] 54.

SIXTH CAUSE OF ACTION (Professional Negligence)

111e County repeats, rea1leges and incorporates the allegations contained in

1 9 paragraphs 1 through 1 53 as if fully set forth herein.

20 155. By undertaking to provide the County with conSUlting, implementation and

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

24 implementation and integration of the public sector SAP system.

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


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.

3 1 57. Deloitte's negligence, as described above, proximately caused damages to the

4 County in an amount to be determined by the trier of fact.

.5 158 . In addition, because Deloitte' s negligent acts were committed knowingly,

6 willfully and with a conscious disregard of the rights of the County, the County is entitled to

7 recover punitive damages in an amount to be determined by the trier of fact.

8 PRAYER

9 WHEREFORE, the County of Marin respectfully requests that this Court enter judgment

1 0 against Deloitte and provide the following relief:

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Awarding the County actual, indirect, economic, consequential, and

compensatory damages in an amount to be determined by the trier of fact, but in

no event less than $30 million;

In the alternative, that the Court rescind the Agreement, and award the County

restitution and special damages necessary to accomplish full justice, and/or

require Deloitte to return all fees and expenses pai d by the County to Deloitte

under the Agreement, but in no event less than $30 million;

In the alternative, awarding the County all fees and expenses paid by the County

to Deloitte;

Awarding the County punitive and/or exemplary damages in an amount to be

d",termined by the trier of fact;

Awarding the County pre-judgment and post-judgment interest at the highest

rate(s) provided by law; and


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(6) Awarding the County such other and further relief, at law and in equity, to which

it may be entitled.

Dated: May 28, 201 0

KASOWITZ, BENSON, TOMES & FRIEDMAN LLP

MARK P. RESSLER R. TALI EPSTEIN 1633 Broadway New York, New York 10019 Telephone:(212) 506-1700 Facsimile: (2 1 2) 506- 1 800 [email protected] [email protected]

:�cE�cOUNSEL' COUNTY OF MARlN

PATRICK K. FAULKNER (SBN 070801) County Counsel SHEILA SHAH LICHTBLAU (SBN 1 67999) Deputy County Counse"l 3501 Civic Center Drive, Room 275 San Rafael, California 94903 Telephone:(415) 499-6 1 17 Facsimile: (415) 499-3796 [email protected] [email protected]

Attorneys for Plaintiff COUNTY OF MARIN

3 5 COUNTY OF MARIN'S COMPLAINT AGAINST DELOITTE CONSULTING LLP

Marin County complaint against Deloitte Consulting on failed SAP project

Documents

d d d d d asbestos

d d d asset forfeiture

d d wrongful termination

d defamation

d joinder

d counter

d d i rx rx

d intellectual property