IBM Sued By Wolf Administration Over Unemployment Compensation System Upgrade Project

PHILADELPHIA (CBS) -- Pennsylvania Gov. Tom Wolf announced his administration has filed a lawsuit against IBM for their "fraud and failures" related to the Unemployment Compensation Modernization System project.

According to the governor, the project was awarded to IBM in a fixed-price contract for $109.9 million with a completion date of February 2010.

"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.

"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."

The governor's office says an independent assessment of the IBM project recommended that DLI not continue with the project because of the high risk of failure.

Because IBM's benefits system presented "unacceptable risks and would be unreliable," according to the governor's office, DLI allowed the UCMS contract to lapse on its September 28, 2013 expiration date.

At that point, the UCMS project was 45 months behind schedule and $60 million over budget.

The administration lawsuit, which was filed on behalf of the Department of Labor and Industry, assert claims for breach of contract, fraudulent misrepresentation, negligent misrepresentation, constructive fraud, and fraudulent concealment.

The suit was filed in the Dauphin County Court of Common Pleas.