Whistle-blower warned EDD bosses about glitches in software upgrade

A year before California launched an upgrade to a computer system that pays disability claims to injured workers, state employee Michael O’Brien warned his bosses of big trouble ahead.

An application architect, he was in charge of making sure that the new software would enable Californians to file and track their claims electronically — and O’Brien didn’t like what he saw. In fall 2011 he sent dozens of emails to his superiors at the Employment Development Department informing them the system was riddled with errors that could jeopardize a successful launch.

O’Brien’s predictions proved accurate. When it debuted in September 2012, the new system malfunctioned immediately. Wait times for injured workers soared as the backlog of claims mounted. EDD staffers resorted to processing claims by hand as the computer staff scrambled to make fixes.

But by that time, O’Brien, a 20-year-veteran, was no longer part of the team. EDD had removed him from the project in August 2012 against his will, following a reprimand for “inefficiency, discourteous treatment and failure to follow procedure,” according to an internal memo. His offense: repeatedly pointing out software problems that his bosses insisted were fixed. His supervisor said he was costing the project time and money because of the resources needed to address his concerns. He was also forbidden from discussing certain problems he flagged with co-workers or vendors.


O’Brien filed a whistle-blower complaint in September 2012 with the California Personnel Board contending that his muzzling and transfer to another department amounted to punishment for speaking up. The 170-page document, obtained by The Times, contains dozens of emails, documents and other correspondence between O’Brien and his superiors.

Project management “retaliated against me because I reported ... improper contracting practices, bad decisions, incompetence and poor internal controls,” O’Brien said in his complaint.

The Personnel Board ruled in December 2012 that there was no evidence of retaliation and that his complaints were not protected disclosures. In its written response to the retaliation complaint, an EDD attorney said O’Brien was transferred because the project was winding down.

Still, the complaint and its cache of documents provide a window into the technology woes that have battered EDD’s reputation and cost taxpayers millions of dollars in cost overruns in recent years. It alleges substandard work and contract violations by Deloitte Consulting, the outside contractor hired to run the upgrade. And it contradicts recent public statements by senior officials at EDD that they weren’t aware of the extent of recent problems.

Two state legislators contacted by The Times say they plan to push for an audit of the agency.

The EDD has a “cultural problem that folks at the top aren’t listening to employees below them,” said Assemblywoman Lorena Gonzalez (D-San Diego), who has been critical of the agency’s botched information technology efforts.

EDD workers spent six months working through the claims backlogs created by the faulty disability system, which serves about 700,000 Californians a year. The agency declined to specify how many applicants were affected. But the on-time processing rate plunged to 60% from about 90% before the upgrade, a condition that persisted for several months, according to a March legislative report.

More recently, the EDD made headlines again after another information technology meltdown halted unemployment benefits to about 150,000 Californians. That computer system, also designed by Deloitte Consulting, shares much of the same architecture and software as the disability system.

Some jobless workers say they still aren’t getting their checks. Margaret Black, 50, an unemployed paralegal who lives in Santa Monica, said she is owed about $3,440.

“It’s stupefying that they’re having so many problems trying to get technologically updated,” she said. “The state has made me blow through my savings, which took me years to build up.”

The EDD’s gaffes and delays have also hit taxpayers. Combined, the disability and unemployment insurance computer upgrades cost $196 million — about $100 million more than originally budgeted. The Assembly Insurance Committee, which oversees those worker programs, held hearings in March and November to question top brass at EDD on why the agency continues to struggle.

At those two hearings, agency officials acknowledged some glitches but painted a largely upbeat picture of EDD’s information technology efforts. In March, Elizabeth Wahnon, deputy director of the disability insurance branch, said the upgrade was “operating as designed.”

O’Brien’s whistle-blower complaint contrasts with Wahnon’s assessment. In emails to his superiors, he flagged a raft of troubles, including what he contended was a poorly designed database shared by the disability and unemployment insurance systems. In a January 2012 email to Sumi Smith, chief of the technology product development division, he expressed frustration about being silenced by his bosses on that topic.

“I have been prohibited from discussing this issue and others that I have elevated to you,” O’Brien said. “This has placed me in an untenable ethical position.”

In a phone interview, O’Brien said he’s now an application architect working on the state’s healthcare exchange, Covered California. A non-union employee, he declined to comment further, citing fears of endangering his employment with the EDD.

His whistle-blower complaint also alleges that Deloitte violated its contract with the state by failing to provide qualified consultants to replace a senior software architect and a veteran database designer who left the project midstream. O’Brien said their replacements lacked the minimum years of experience required by the contract. He alerted his supervisors by email and by filing an item with the project’s tracking log, which is a detailed record of issues raised by staff over the course of the project.

Less than two weeks after O’Brien sent his email, EDD managers rewrote the contract language to ease the experience requirements for the replacements. Those changes were documented in an email sent to O’Brien and other project staff by Babette Davis, the project’s executive liaison in September 2011.

EDD spokesman Patrick Joyce said such contract changes aren’t unusual. He said the replacement consultants had already been working on the project, providing continuity and hands-on experience that provided “very high value to the state.”

In California, Deloitte has garnered more than $540 million in tech work over the last 10 years, and is one of the state’s largest information technology contractors. Over the last two years, the company has spent $2.6 million on lobbying state legislators.

The New York firm has a history of delivering projects that are late, over budget and don’t work as promised. Massachusetts and Pennsylvania have reported problems with Deloitte-led upgrades to their unemployment insurance systems. So has Florida. In December, that state said it would withhold a $3-million payment to Deloitte and fine the contractor $15,000 per business day until glitches in its unemployment insurance website are fixed. That’s on top of $1.5 million that Florida earlier recovered in “financial restitution” from Deloitte for delivering a faulty system.

Deloitte refused to comment about staffing issues raised by O’Brien’s complaint. In a two-paragraph emailed statement, a spokeswoman said the disability insurance system was an award-winning project that has helped California better serve residents.

But some state officials say they’ll soon be pushing for more complete answers.

“Those who did this need to explain what’s going on,” said Assemblyman Curt Hagman (R-Chino Hills), vice-chair of the Insurance Committee. “It’s our job on the Insurance Committee to find that out.”

Hagman said he, like Gonzalez, would push for a legislative audit of EDD.

Gonzalez, who questioned EDD and Deloitte officials at the November hearing, said she was dissatisfied with what she heard. She said the whistle-blower allegations have only added to her concerns that the agency is unresponsive and mired in dysfunction.

“The more I find out, the more upset and disgusted I am,” she said. “We can do better than this and should expect better.... This is ridiculous.”

Twitter: @rljourno