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IBM Settles Pa. Labor Dept.’s Suit Over $110M IT Upgrade


August 25, 2021

Pennsylvania Gov. Tom Wolf’s administration announced on Tuesday that it has settled a fraud lawsuit accusing IBM of racking up tens of millions in cost overruns while failing to deliver under a $110 million contract to create a new integrated computer system for handling the state’s unemployment compensation program.

The Pennsylvania Department of Labor & Industry said in a statement that it resolved the lawsuit with International Business Machines Corp., but did not provide any further details of the settlement.

“Following an extensive discovery period and exchange of expert reports and opinions, the parties engaged in a lengthy negotiation and the settlement was reached,” the statement said.

IBM has not admitted any liability or wrongdoing and both parties are keen on skirting further litigation costs, the statement added.

Representatives for IBM and for the Pennsylvania department declined to comment beyond the statement, the latter citing the settlement as a factor.

The announcement marks an end to the lawsuit filed in March 2017 by Wolf’s administration over a project that sought to upgrade the state’s outdated unemployment compensation computer system.

The lawsuit said a sweeping computer upgrade the state contracted IBM to complete back in June 2006 fell three years behind schedule, went $60 million over budget, and ultimately never came to fruition.

According to a complaint in the Dauphin County Court of Common Pleas, the upgrade was meant to integrate disparate computer systems that the department relied on to process data regarding tax payments submitted by employers and benefit claims submitted by unemployed workers.

After a three-year bidding process, the complaint said that the state chose IBM for the project based on its representations that it was the only vendor with the type of proprietary databases capable of providing a totally integrated computer system.

But the state said that IBM never came through on its promises.

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The commonwealth is represented by Duane Morris LLP and Cohen Milstein Sellers & Toll PLLC.

Read IBM Settles Pa. Labor Dept.’s Suit Over $110M IT Upgrade.