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Despite lapses, IBM owed $50 million

Welfare privatization feud returns to judge

– IBM Corp. failed to deliver its part of a deal to privatize Indiana’s welfare system, but the company is still entitled to nearly $50 million in fees that the state agreed to pay, the Indiana Court of Appeals found Thursday.

The decision sends the 4-year-old dispute between IBM and the state back to the trial judge to work out the details.

Among those details could be whether the state collects more than $175 million in damages.

The state and the Armonk, N.Y.-based company sued each other in 2010 after then-Gov. Mitch Daniels canceled the $1.3 billion contract that set up call centers for clients and largely automated parts of the state welfare system, leading to a hail of complaints.

“In the most basic aspect of this contract – providing timely services to the poor – IBM failed,” the court said in the 2-1 opinion.

Regardless, the state owes IBM nearly $50 million in agreed-upon fees, the judges said.

However, the court said IBM was not entitled to $13 million that the trial judge awarded it because the state terminated the contract early. The appellate court also sent that portion of the case back to the local court to iron out other details.

John Maley, one of the attorneys who represented the state in the lawsuit, said the ruling confirmed the state’s contention that IBM breached its contract.

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