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IBM tries to dodge $1bn sueball for deal won with 'ethical transgressions'

Big Blue argues Australian case over botched payroll project should not proceed

IBM is attempting to fend off a potentially colossal damages claim in the Australian State of Queensland.

The dispute started in 2007 when IBM bid AU$6million for a payroll project at the State's Department of Health. The project blew out beyond the billion-dollar mark but didn't deliver: the Department's thousands of staff were overpaid, underpaid, or sometimes not paid at all. Those paid more than they were due have been forced to repay the State. Some are still being overpaid to this day, despite extensive remediation to the SAP-based payroll (SAP is held to be blameless in the affair).

A commission of inquiry found that IBM committed ”ethical transgressions” to win the deal. But by the time the inquiry's report landed, Queensland's government decided to put the matter behind it and settled with IBM. The commission’s report explained why, detailing plenty of mistakes by the State government and criticising a very scanty project brief that was was held likely to result in a difficult project.

Come 2012, however, a newly-elected government decided to pursue IBM through the courts in order to recoup some cash. Even though Queensland's government has since changed again, the new regime has continued the case which this week landed in the Supreme Court.

The case kicked off today and reportedly saw IBM argue that the 2010 settlement included an agreement not to pursue further litigation and that in any case it was government incompetence that saw the project blow out so badly. The State is counter-arguing that the settlement did not preclude further legal action.

Four days have been set down for the case and it will likely take a few more weeks for a judgement to emerge. If Queensland wins, plenty more court days will be needed to settle the matter. The State's not saying how much it is after, but a previous statement of claim was for a billion dollars (US$710m or £450m. ®

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