By Kim S. Nash  |  Posted 2003-01-01 Email Print this article Print

What did it take to get noticed last year, for better or worse? Big numbers.


$691MillionThe pit a rogue trader dug, then hid by manipulating his computer systems.

In theory, John Rusnak, a former currency trader with Allfirst Financial in Baltimore, wasn't allowed to make deals for the firm valued at more than $2.5 million. In reality, Rusnak not only made trades far over that limit but he did it badly, losing $691 million for Allfirst between 1997 and 2001. Then he covered it all up. Fake trades that masked the losses went undetected, courtesy of software applications that didn't communicate and a trade-verification routine that relied too much on paper and faxes.

An internal Allfirst investigation found that Rusnak gave phony trading data to the accounting and oversight department, giving it values for trades different than the actual figures entered into his Reuters trading-desk software. Rusnak's winning—though bogus—trading record earned him $650,000 in bonuses, $433,000 of which he had collected when the ruse was discovered. Rusnak was fired last February.

In October, Rusnak pled guilty to bank fraud. This month, he is due to start a federal prison term of 7 1/2 years.

$500 MillionThe federal fine Schering-Plough paid after repeatedly violating drug-manufacturing laws.

Chronic drug-making violations—many related to errant or missing data—at four of Schering-Plough's manufacturing plants since 1998 finally prompted the U.S. Food and Drug Administration (FDA) to take legal action against the pharmaceutical company last year. The two settled the case in May, with Schering-Plough agreeing to pay a $500 million fine—the largest penalty ever imposed by the FDA.

Most of the core software at Schering-Plough's pharmaceuticals division is several years old and custom-coded. A series of FDA inspections of plants in New Jersey and Puerto Rico found a failure to reject drugs that didn't meet specifications, missing data from lab tests, and incomplete records related to quality assurance routines.

Many of the violations could be stopped with smarter use of more modern information technology, say pharmaceutical industry analysts. Schering-Plough declines to talk about the mess or what it's doing to fix it.

A large part of a $60 million pot to address the problem will go to technology, says one company executive.That includes installation of business software from SAP, the executive says.

$95 MillionValue of software contract canceled by state of California after critics cried foul.

Often the most glaring technology mishaps happen in government. That is not to say that some company, somewhere wouldn't sign a $95 million, six-year, 270,000-seat software contract without putting the project out to bid. But it isn't likely in the corporate realm. The state of California did that in May 2001, then killed the deal a year later.

An audit last spring found that California had bought Oracle software that state agencies would probably never use. Oracle said the contract for databases and applications would ultimately save the state $100 million. Auditors differed, fuming that it would actually cost the state $41 million more than its existing software deals.

Meanwhile, a $25,000 contribution from Oracle to Gov. Gray Davis, and one for $50,000 to Bill Lockyer, attorney general, were returned to the vendor. The politicians and Oracle insisted that nothing improper occurred between them. Elias Cortez, the state's chief information officer, was suspended in May, then resigned in July. The state returned to a system where each agency buys its own software and hardware, rather than having centralized purchases.

Senior Writer
Kim has covered the business of technology for 14 years, doing investigative work and writing about legal issues in the industry, including Microsoft Corp.'s antitrust trial. She has won numerous awards and has a B.S. degree in journalism from Boston University.

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