Software Deal Shakes Up California Governor's Race

SAN FRANCISCO – California lawmakers want to know why the state agreed to pay $95 million for Oracle software in a deal that according to a state audit could cost taxpayers more than $40 million in unnecessary charges.

"In the past, the state would procure a component at a time, project at a time," said Elias Cortez, the director of the state's Department of Information Technology.

Not so this time, and Cortez has been suspended after claims that inexperienced negotiators botched a deal that would have saved the state money by buying the software in bulk.

But critics say incompetence was just part of the problem. Charges of corruption now loom over the administration of Gov. Gray Davis.

As the deal was being negotiated, Oracle donated $25,000 to Davis' re-election campaign.

"It looks like it was more than a quid-pro-quo. It smells like a payoff," said Shawn Steel, chairman of the California Republican Party.

Davis claims he knew nothing of the deal or the donation. And after ordering an investigation, he sent the highway patrol to guard trash at the DIT to make sure no documents are shredded.

"No one's more interested than I am to find out exactly what happened and get to the bottom of it and make it right," he said.

Thursday, he returned the $25,000 to Oracle, and he is trying to rescind the contract and contain the damage. He received resignation letters from two state workers close to the deal.

But as the fall campaign season approaches, Davis' $30 million warchest — and the way he raised it — will come under scrutiny.

"You don't raise, like Gov. Davis has, a million dollars a month without breaking some rules," Steel said.

Republicans have also asked the U.S. attorney to investigate, saying an independent body outside of state government is needed to ensure a fair investigation.

Whether laws have been broken remains to be seen but after last summer's energy crisis, the Oracle scandal marks another messy situation for Davis.