Gov. Tom Wolf announced Thursday his administration is suing IBM for fraud, claiming the Armonk, N.Y.-based tech corporation received a $170 million payment from the state for a "comprehensive, integrated, and modern system that it never got."
he Wolf administration said IBM was awarded a fixed-price contract of $109.9 million for work related to the Unemployment Compensation Modernization System project, which was supposed to be completed in February 2010.
For four decades, the state's Labor Department used several different, and outdated, computer systems to collect unemployment insurance taxes from the state's employers, as well as distribute payments to roughly 1.3 million unemployed residents in the Commonwealth's.
Delays kept the project going for several more years and by Sept. 28, 2013 – when the contract expired, the project was $60 million over budget and nearly four years behind schedule, court records show. "... The most critical, complex, extensive and essential functionality of the system was still not operational," the lawsuit reads.
“All told, Pennsylvania taxpayers paid IBM nearly $170 million for what was supposed to be a comprehensive, integrated, and modern system that it never got,” Wolf said in a statement. “Instead, the Department of Labor and Industry has been forced to continue to support many of its UC program activities through a collection of aging, costly legacy systems, incurring tens of millions of dollars in server, support and maintenance costs."
IBM denies the allegations in a statement: "The Commonwealth of Pennsylvania's claims have no merit and IBM will vigorously defend this suit."
The administration filed the lawsuit in the Dauphin County Court of Common Pleas on behalf of the Department of Labor and Industry.