Mexico City Goes After IBM Over System

At best, computer giant IBM has a public-relations mess on its hands in Mexico City these days. At worst, it faces criminal charges over a computer system that its customer, the city’s attorney general, says is a $24-million lemon.

International Business Machines Corp. is being investigated for improper bidding practices and conspiracy in connection with a system to provide Mexico City law enforcement agencies with a criminal database to facilitate the filing of police reports at some 70 stations around this megalopolis.

The case has a strong political subtext, however. Observers say it could be fallout from the bitter political skirmishing between Mexico City’s new mayor, Cuauhtemoc Cardenas of the Party of the Democratic Revolution, and his predecessors of the Institutional Revolutionary Party (PRI), from whom he inherited the IBM contract.

The city’s complaint, laid out Friday for reporters by Mexico City Atty. Gen. Samuel Del Villar, sounded less like a criminal case than the lament of a frustrated new-computer owner. Del Villar alleged that the city was grossly overcharged for a “badly designed” system that doesn’t work.

“It’s totally dysfunctional for the judicial process. . . . The problems are irreversible,” Del Villar said of the system, which was installed in January, three months after the original due date.

Del Villar described previous PRI-dominated federal and city governments Friday as “dictatorships of corruption.”

The high-profile case is the second in two years that has forced IBM to run a gantlet of bad publicity in Latin America. In 1996, two former IBM executives in Argentina were indicted on fraud charges in connection with a $250-million bank computer deal gone sour. That case is still under investigation.

The Mexican case came to light June 18 after the city attorney general’s office issued arrest warrants for three IBM employees and 19 city workers. That followed televised police raids on IBM offices here that shocked the local business community.

At Friday’s press briefing, Del Villar said IBM was being investigated because it got the $24-million computer contract without going through “public and transparent bidding,” which is required in any city business involving more than $10,000.

“All [businesses] that want to sell something to the government should know the article” of the Mexican Constitution, Del Villar said.

Fraud charges are also being looked into in connection with the case, Del Villar told reporters, although no formal charges have been brought. The 22 workers remain free on bail. All are Mexican citizens.

As it has since the case came to light, IBM denied the improper bidding charge, saying Friday that it beat out two other U.S. competitors, although it refused to identify them.

But in an interview last week, District Judge Sara Patricia Orea Ochoa, who approved the investigation and issued the arrest warrants, said: “There was no competition.”

IBM spokesman Javier Avila in Mexico City said glitches in the system, which includes 2,000 separate personal computers, were normal for any large network and that IBM was preparing to fix them when the city attorney’s office shut it down in May and initiated its criminal investigation.

But Mexico City criminologists, emphasizing they did not know details of the probe, sympathized with IBM, saying arrest warrants and office raids are hardly the way to work out computer bugs.

“I do think there is something political at the bottom of it,” lawyer and criminology professor Rafael Ruiz Harrell said Friday. “My personal impression is the whole thing could have been solved by granting IBM time to kill the bug in the system.”