HDOT RESPONDS TO CIBER BANKRUPTCY FILING AND CIBER COUNSEL’S REQUEST TO WITHDRAW FROM THE LITIGATION

News Release from HDOT, Apr 19, 2017

HONOLULU – The Hawaii Department of Transportation (HDOT) announced it will continue to pursue its claims against Ciber, Inc., a consulting firm that failed to deliver a software implementation project for the State, as a creditor in Ciber’s recent bankruptcy filing.

In a lawsuit pending since September 2015, HDOT has been litigating claims against Ciber for fraud, false claims, breach of contract and unfair competition stemming from Ciber’s misrepresentations and performance failures in connection with the failed implementation of a new financial software system for HDOT’s Highways Division.  Ciber abandoned the project in 2014 even though the software system was unfinished and unable to carry out essential HDOT functions. HDOT’s case described, among other contentions, how Ciber’s managers had admitted in internal reports that Ciber had submitted fraudulent and erroneous invoices and payment demands to HDOT.

Last year the Court denied Ciber’s attempt to dismiss HDOT’s fraud claims. Since then HDOT has vigorously pursued discovery against Ciber, obtaining additional documents highlighting Ciber’s misconduct, including that Ciber substantially underreported to the Hawaii State Ethics Commission certain lobbying expenditures.

Last month Ciber’s local counsel sought to withdraw from the case, as HDOT began work on motions to force Ciber to produce additional documents and information. Last week Ciber filed a Chapter 11 bankruptcy proceeding in federal court in Wilmington, Delaware.

“Ciber’s bankruptcy filing is a vindication of HDOT’s decision to resist Ciber’s demands for payment, given that the system Ciber attempted to deliver was incomplete and defective,” stated Ford Fuchigami, Hawaii Department of Transportation Director. “HDOT will take all necessary steps to preserve its claims in Ciber’s bankruptcy case, and will consider additional measures to ensure that vendors and others who violate the public trust will be held accountable for their misconduct, and that the people of Hawaii will be protected.”

“Although the bankruptcy filing stays our pending litigation, we are actively looking into every legal option to make the State whole,” said Russell Suzuki, First Deputy Attorney General.

HDOT’s claims allege that Ciber pulled a “bait and switch” by misrepresenting its capabilities in order to land a contract to replace HDOT’s existing computer system with a new enterprise resource planning (“ERP”) system to run the State’s highway financial management operations. HDOT asserts that Ciber was unable to design and implement a system that could perform core functions, including obtaining reimbursements from the Federal Highway Administration (“FHWA”).

According to HDOT’s claims, the fraud continued during the project, as reflected by internal Ciber documents that HDOT attached to its pleadings. In those documents, senior Ciber managers acknowledged submitting “erroneous invoices and fictitious change orders,” billing HDOT for work that Ciber knew was of no value, and deliberately under-staffing the Project to meet Ciber’s own internal profitability benchmarks.

HDOT is seeking tens of millions of dollars in damages, including fees it paid to Ciber, fees paid to third parties, and the costs of a replacement software system. HDOT’s fraud claims expose Ciber to possible punitive damages, and false claims and unfair competition claims expose Ciber to trebled damages.

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