IBM: Daniels’ email shows he had key role in deal

Gov. Mitch Daniels had such a keen interest in the state's $1.37 billion contract with IBM Corp. to automate welfare intake in Indiana that he asked an aide if an unexpectedly high number of telephone calls to a call center was a ploy by a state employees union, an IBM attorney said Monday.

IBM wants to depose Daniels soon because it's concerned he will announce he's running for president and would be too busy on the campaign trail to give a deposition, said IBM attorney Steven McCormick, who also wants to depose Daniels' chief of staff.

Daniels has said he won't decide on a White House run until after the General Assembly adjourns later this month.

"He made the key decisions all the way," McCormick said. "We're concerned that any delay will be met with, 'Well, now it's too late.'"

However, Peter Rusthoven, an attorney for the state, said a state law exempts certain high-level state officials including the governor, from court subpoenas and that other current and former state officials who are expected to testify will provide the same information Daniels and chief of staff Earl Goode were privy to.

Marion Superior Court Judge David Dreyer told the attorneys he expected to rule on the depositions within two weeks.

The Indiana Family and Social Services Administration is suing IBM for $437 million, the money it paid the Armonk, N.Y.-based technology giant to introduce call centers, document imaging and other automation to applications for food stamps, Medicaid and other public assistance programs before Daniels fired IBM for breach of contract in October 2009.

IBM wants the state to pay more than $50 million in deferred payments and equipment costs.

The oral arguments lasting more than two hours revealed the level of Daniels' involvement in one of the biggest outsourcing contracts in state history. McCormick displayed on the IBM attorney's table four thick binders containing what he said were 930 email messages to and from Daniels that the state has surrendered so far.

"They're here to illustrate the cradle to grave, preconception to afterlife" level of Daniels involvement in the deal, McCormick said.

Daniels received detailed reports on the number of calls welfare clients made to a call center created with IBM technology, and after one report showed an unusually large number of calls, he asked an aide if it was a union ploy, McCormick said. McCormick didn't identify the union, but a state employees union, the American Federation of State, County and Municipal Employees, vociferously opposed the outsourcing deal.

Another e-mail message instructed recipients "the governor was to be familiarized with all aspects of modernization," McCormick said, using the term the state used for the IBM project.

"The governor was not only the chief decider, he was the chief cook, he was the chief bottle washer," McCormick said.

Rusthoven said the level of Daniels' interest in the project did not trump a state law dating to the 1900s that protects the governor and certain other state officials from answering subpoenas. Rusthoven said it protects them from depositions as well, so well that there has never been an exception.

"It's never happened. The governor has never been called to testify," Rusthoven said.

IBM set out to depose Daniels on his knowledge of the deal before it had deposed anyone else in the case, Rusthoven said.

"There's been no attempt to get it by less intrusive means," Rusthoven said.

McCormick said IBM hopes to depose Goode and former FSSA secretaries Mitch Roob and Anne Murphy before Daniels.

The state's initial complaint in the case against IBM sought three times the amount of actual damages, or more than $1.3 billion, from IBM, but Rusthoven said the state has amended the lawsuit to drop the request for triple damages.