Software firm sues education department

Says loss of contract was improper decision

Ryan Alessi at the Herald-Leader reports:

FRANKFORT --An education software firm has alleged that the Kentucky Department of Education improperly blocked it from having its contract renewed and enlisted the Finance and Administration Cabinet to cover it up.

Software Technology Inc.'s allegations, which are detailed in court documents filed late Wednesday in Franklin Circuit Court, read like a conspiracy novel and include claims of a "secret unlawful deal" between the highest levels of the education department and Jefferson County Public Schools.

The lawsuit's documents quote depositions of witnesses recounting a "stomach-wrenching, bid-rigging directive," meetings in parking lots and the destruction of key documents that led to another company's landing the contract.

Laurence Zielke, the Louisville attorney representing Alabama-based Software Technology, filed the motion Wednesday asking the judge to issue a judgment without a trial. In his motion, Zielke claims the state "engaged in fraud, misrepresentation and unlawful acts" to prevent the company from winning the bid to continue tracking student attendance for the 176 Kentucky school districts.

The defendants -- the education department, finance cabinet, the company that eventually won the bid and Kay Kennedy, a division director at the education department -- deny any suggestion of wrongdoing and are preparing to ask the court to dismiss the suit.

A hearing is scheduled for Aug. 15.

Lawyers for the finance cabinet dismissed Software Technology's arguments as claims of a "disappointed bidder" in the agency's July 5 answer to the suit...

Process of controversy

...The saga began early in December 2005 when the education department put out a request for companies to bid on a contract to run the student information system -- the job that Software Technology, also called STI, had been doing since 1999.

But Jefferson County school officials raised concerns about STI.

A March 22, 2006, memo from then-Jefferson County Superintendent Stephen Daeschner described "inefficiencies" in the company's software. "For two straight summers of implementation, our staff has gone through disastrous problems with delays and lost data," Daeschner wrote.

Jefferson County school officials urged lawmakers during the 2006 General Assembly to pass a provision that would allow the district to opt out of any state-mandated technology system in case STI won the job again.

"In order to defeat the exemption of JCPS from the statewide (computer system), a secret unlawful deal was struck between (the education department) and JCPS that the commonwealth would not select STI as the vendor under any circumstances," Zielke's lawsuit memo asserts.

That deal allegedly was struck between then-education Commissioner Gene Wilhoit and Daeschner, according to the suit, which quotes a March 3 e-mail from Kennedy to another education department worker.

"The commissioner has committed to Dr. Daeschner that JCPS will be with us 'the rest of the way' and we will not implement a solution that does not work for them," Kennedy wrote in the e-mail.

Several members of that committee also testified that Kennedy told them about a deal between the department and Jefferson County.

Frank Schwab, a representative from Simpson County, testified that he was told by two unnamed department of education employees during an encounter in a parking lot that "they had been called into their superior's office and had been told that we were not to leave this with STI being named the successful awardees."

"It gnawed on me a whole lot," Schwab told attorneys. " ... I was almost sick to my stomach, saying to myself, 'Frank Schwab, what have you gotten yourself into?'"

STI rejected

STI received the highest scores but didn't get the job.

"Kay Kennedy then, following the secret, unlawful directive of Commissioner Wilhoit, made the capricious, arbitrary, unlawful decision to request that the finance cabinet buyer cancel" the decision, the suit says.

The finance cabinet didn't produce any documentation justifying that move after STI challenged the decision. But the board laws allow the state to make such a change, said Jill Midkiff, finance cabinet spokeswoman. "We can cancel or reject all proposals at any time if it's determined to be in the commonwealth's best interest," she said.

The education department launched a second round of bidding, in which six committee members were assigned to rate companies.

That raised red flags with several school officials.

"It seems to me that we have a secret committee working on a secret document to choose a vendor that will affect every school district in the state," wrote Brenda Holder, district technology coordinator for Bath County Schools in an April 17, 2006, e-mail...