Can a $93 billion company be publicly shamed into charity? My guess is not, but the Contra Costa school district in California is hoping IBM can see it in its Big Blue heart to erase some $5 million in long-overdue debt.
This week four California state legislators threw their support behind West Contra Costa School District by pleading with IBM to release the district from the debt. Assemblywoman Loni Hancock, D-Berkeley; Assemblyman Mark DeSaulnier, D-Concord; state Senate President Pro Tem Don Perata, D-Oakland; and Sen. Tom Torlakson, D-Antioch, sent a letter to IBM CEO Samuel Palmisano requesting that the computer-industry giant write off the 15-year-old debt as a charitable contribution, according to a story in the Contra Costa Times.
“Unlike corporations such as IBM – with revenues of $22 billion in the first quarter of 2007 alone – our schools do not have the ability to generate new dollars to fund projects or pay for employees,” the lawmakers wrote. “Our schools rely solely on limited state and federal assistance to educate our students and every dollar is precious.”
The back story on this tale is that the school district owes IBM for computers ordered in the late 1980s and early 1990s. For one reason or another the computers were never used and no one now seems to be able to locate the paperwork or the hardware. The school district experienced hard financial times and ultimately never paid Big Blue for the computers.
In 1993 the district and IBM negotiated a long-term settlement that said the school district would pay the first of four $1.25 million installments beginning in 2008. Payments were deferred until then because 2008 was the year the district was scheduled to finish making state loan repayments under its previous loan plan, according to the Contra Costa story.
Reports this past April said IBM executives expect the district to pay the amount in full under the agreed-upon pay schedule. A letter from IBM Chief Financial Officer Mark Loughridge to district Superintendent Bruce Harter called the repayment plan “generous” on the part of IBM because the company is not charging interest. IBM has not commented on the situation since then.
So now the school district is looking to put a little political pressure on IBM to forgive the debt entirely. Such a move might create a precedent IBM wouldn’t want to set.
Typically such debts are restructured further or spread into a new contract. For example, IBM and Amtrak in 2002 signed a $229 million IT outsourcing deal with that will save the passenger railroad $85 million over the course of the seven-year deal. The contract, which is an extension of a 10-year agreement between the two companies, calls for IBM Global Services in Armonk, New York, to manage Amtrak’s entire computing infrastructure from a data center in Manassas, Virginia. Because Amtrak still owes IBM $101 million from the previous contract, the total of the renegotiated deal is $330 million, according to an IBM.
Then again maybe IBM has had it with state educators. IBM is involved in another case in North Carolina where state education officials recently dropped IBM as the contractor for an elaborate computer network intended to manage student and school data statewide and will instead complete the costly project themselves, according to the News & Observer.
IBM and the state Department of Public Instruction have been at odds for months over the development of a complex computer system, known as NC WISE, that will replace a data management system in place since the mid-1980s. The state has withheld $4.5 million in payments to IBM, saying the company has failed to correct problems and provide promised computer applications. The company didn’t respond to a request in December from the state to fix what it said were problems and says it has lived up to its obligations.
