STATE'S ORACLE DEAL DRAWS FBI SCRUTINY / DUMB MISTAKE': Bureau to question ex-Davis aide, who admits taking campaign check was 'stupid'

Oracle, Oracle, Oracle when you fight the money your life is on the line.

STATE'S ORACLE DEAL DRAWS FBI SCRUTINY / DUMB MISTAKE': Bureau to question ex-Davis aide, who admits taking campaign check was 'stupid'

2002-05-10 04:00:00 PDT Sacramento -- The FBI is preparing to interview a former Davis administration official who accepted a $25,000 campaign check from Oracle Corp. just days after the state signed a questionable contract with the Redwood Shores company,
sources told The Chronicle.
Davis announced Thursday that he will return the $25,000 donation from Oracle -- "in view of recent developments." The administration is meeting with Oracle and its business partner, Logicon, to rescind the software contract before the state has to make its first $14 million payment in September.
As the early stages of a possible full-blown federal investigation began, Arun Baheti, the former Davis technology aide, said that accepting the $25,000 campaign check was "stupid" but insisted that his role in pushing the $95 million no-bid contract is being overstated.
The after-work meeting between Baheti and Oracle lobbyist Ravi Mehta already is being investigated by a legislative audit committee and Attorney General Bill Lockyer, who said he also thinks Baheti's acceptance of the campaign check was "stupid" but doesn't appear to be illegal.
"I am perfectly happy to admit I made a dumb mistake," Baheti said in an interview with The Chronicle.
Davis spokesman Steve Maviglio said no one in the governor's office has been contacted by the FBI about an interview. The FBI and Oracle declined to comment about the federal inquiry, although sources said Oracle officials have not been asked about interviews.
To avoid any appearance of conflict because of his criminal investigation, Lockyer agreed Wednesday to return $50,000 in campaign donations he had received from Oracle. Davis agreed to do the same thing Thursday. But questions remain about another Oracle check sent to Davis, this one for $20, 000. The check was reported on the secretary of state's campaign finance Web site a few months ago, about the time the state auditor was investigating the Oracle contract.
The Davis campaign said it received the check on Feb. 22 but that Oracle inexplicably stopped payment on it.
Oracle spokeswoman Jennifer Glass said the company is researching the entire incident.
Baheti, who resigned his position as director of e-government last week, declined to comment about any of the government investigations. But he agreed to be interviewed by The Chronicle Thursday about his role in the May 2001 contract and the subsequent check.
Baheti is expected to be called in two weeks before the Joint Legislative Audit Committee, which is investigating the contract. The Oracle deal would have outfitted the entire state government with a database program to process everything from fishing licenses to outstanding warrants.
An April 16 state audit revealed that the Davis administration had bought 270,000 software licenses from Oracle when 50,000 would have been more prudent.
The auditor estimated that between $6 million and $41 million could be wasted,
although Oracle says the state actually would save up to $163 million because of the high-volume purchase.


Already, high-level Davis administration officials have testified that Baheti had a major role in pushing the contract in the days before it was signed.
Kari Dohn, the governor's policy adviser, testified that Baheti offered to take over responsibility for the Oracle contract because she was too busy with the energy crisis. And Elias Cortez, the now-suspended director of the Department of Information Technology, said Baheti was a driving force behind the contract.
Baheti has acknowledged meeting with Logicon, which pitched the deal, and attending a critical May 24 meeting with other Davis aides about the contract. But Baheti said he was asking skeptical questions about the deal at the meeting and also denied that Cortez was reporting to him.
Cortez has deflected criticism about pushing the contract, characterizing himself as a mere employee of Baheti and other top Davis aides and even an outside consultant Davis had hired. Aileen Adams, secretary of the State and Consumer Services Agency, has called Cortez a liar.
"I can't speculate on what Eli is thinking," Baheti said. "I can say that some of his testimony certainly does not match the facts or my recollection of the facts."
Cortez, who has been suspended with pay from his $123,000 post, could not be reached Thursday.
Baheti said he was shocked when he read in the newspapers that Oracle would be paying $28 million to Logicon, a financial middleman, even though the contract was negotiated directly with Oracle. The effect, Baheti said, was the state would end up paying interest to Logicon and its lender, Koch Financial.


Baheti said every Davis administration official who gathered in the private May 24 meeting to discuss the Oracle contract agreed that Cortez and Barry Keene, the director of the Department of General Services, should handle the deal from there. Keene, who signed the contract, resigned two weeks ago.
"Eli (Cortez) said the numbers checked out on the number of licenses (needed) and so the group consensus was Eli and Barry Keene would see if the terms worked with Oracle," Baheti said.
Through his spokesman, state finance director Tim Gage confirmed Baheti's contention that Baheti was skeptical of the contract and never called Gage to lobby the deal.


About two weeks after the Oracle contract was signed, Baheti met Mehta, the Oracle lobbyist, at a bar in a Sacramento restaurant. Baheti said his job as technology adviser to Davis required him to meet constantly with lobbyists and technology company representatives as well as state agencies.
"I was out with Mehta, and we were talking, frankly, about other issues," Baheti said. "He then mentioned that he owed a check to the campaign committee from a private event several months before, and said to me, 'It's the close of the filing period, would you mind putting this thing in?' I took it and within a few days FedEx-ed to the campaign."
Baheti called the Davis campaign to get its Federal Express account number, but was subsequently reprimanded by campaign adviser Garry South because it's against Davis' policy for state employees to handle contributions.
Oracle has said it wrote the campaign check to Davis in March or April, well before the contract was signed, at a high-technology fund-raiser. The company can't explain why Mehta, who is no longer doing work for Oracle, waited until after the deal was signed to give the $25,000 check to Baheti.


U.S. Attorney John V. Vincent announced Monday that he had directed the FBI to look into the Oracle controversy to see if a full-scale federal investigation is warranted.
The Oracle contract is being cited by some lawmakers as an example of the cozy relationship between technology bureaucrats and high-tech companies as they compete for $1.7 billion a year in state business.
The fact that an Oracle lobbyist could move so easily inside the Davis administration has been the subject of numerous questions by the audit committee. State Sen. Steve Peace, D-San Diego, has said the state technology contracting system is putrid.
But Baheti, in the interview, said all of government is permeated with experts who move from the private sector to consulting with state agencies or working for lawmakers, and back again.
"That is not necessarily bad," said Baheti, a former state Democratic Party official and private management consultant. "It's part of how you keep government open. On the other hand, when it turns into a question of favoritism, then clearly it's an issue."

Arun Bahuti, the governor's former technology adviser, on some of the key issues in the Oracle case:
-- On accepting a campaign donation from an Oracle lobbyist: "I am perfectly happy to admit I made a dumb mistake."
-- On charges that he pushed the Oracle deal: "I can say that some of (suspended technology aide Eli Cortez's) testimony does not match the facts or my recollection."
-- On people who move back and forth between government and private industry: "That is not necessarily bad. It's part of how you keep government open. On the other hand, when it turns into a question of favoritism, then clearly it's an issue."

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