CSC, the Creator of NCTracks, Pays $97.5 Million in Settlement for “False and Misleading Information” Regarding the Company’s Performance as to a Computer Records Contract

You know the magazine Cosmopolitan?  Well, back in 1999, Cosmo decided to branch out from magazines and create a Cosmo yogurt.  Never heard of it?  That’s because Cosmo pulled the yogurt off the market within 18 months of entering the market.  Cosmo yogurt was a complete flop.  But, still, Cosmo yogurt was on the market for 18 months.

Remember “New Coke?” (I’m showing my age).  But back in the late 70s and early 80s, Coca-Cola launched the “New Coke.”  It was an utter flop and consumers demanded the original Coke to return.

If it takes 18 months for NCTracks to be “pulled from the market,” a great number of our Medicaid providers will either be (1) out of business; or (2) no longer accepting Medicaid.

It is indisputable (at least if you do not work for the Department of Health and Human Services (DHHS)) that NCTracks is severely OFF-TRACK.

Providers are going out of business because they are not receiving Medicaid reimbursements.  Or the reimbursements are below the standard reimbursement rates.  There are Medicare and Medicaid crossover problems.  Not to mention providers are extremely frustrated with the amount of time they need to devote to NCTracks issues.  See September 19, 2013, article by Rose Hoban.

Why has NCTracks been such a failure?

Obviously, I do not have the answer to that haunting question.  Believe me, I have heard it all.  I’ve heard that McCrory wants NCTracks to fail because NCTracks was past Gov. Perdue’s baby.  I’ve heard that McCrory wants NCTracks to fail because then he can privatize Medicaid.  I’ve heard that Computer Science Corporation (CSC), the company that writes the computer language for NCTracks is inept.  I’ve heard that CSC begged Wos not go “live,” but Wos pushed the go “live” date.  I’ve heard that the employees at CSC have no idea what they are doing.  I’ve even heard that all the Republican governors have conspired to fo everything in their power to derail the Affordable Care Act (ACA) and this is just one example.

Most likely, none of the above is completely correct…or a small bit of everything.  Regardless, the NCTracks system is hurting our providers that accept Medicaid.  It should not be a party issue.  It is a North Carolina issue.  And, just think how popular the administration would be if they came out tomorrow and trashed the whole NCTracks system….Now that would be something!!!

With all that said, I found an interesting tidbit the other day about CSC.

September 9, 2013, CSC settled a lawsuit with its shareholders for $97.5 million.  Is this germane to the NCTracks tomfoolery that we are all enduring?  Perhaps not…but…perhaps.

Shareholders of CSC (which, BTW, is a BILLION dollar company) brought a class action lawsuit against CSC over alleged false statements about accounting and the company’s performance on a multibillion-dollar contract.  Click on “class action lawsuit” to read the Complaint.

A Memorandum filed in support of the Complaint alleged that CSC “made false or misleading statements or omitted to disclose material facts” about internal controls over financial reporting and about CSC’s performance on a $5.4 billion electronic patient records contract with the U.K.’s National Health Service.

The plaintiffs alleged that the false and misleading statements regarding the controls over financial reporting and CSC’s performance on the $5.4 billion contract caused the stock to artificially inflate then plummet when the truth came out.

After reading the Complaint, this is what I gleaned that CSC allegedly did with respect to the electronic patient records contract (sound like what CSC has here in NC?):

Under the National Health Service (NHS) Contract, CSC agreed to build a computerized medical records system and develop the necessary software to create digitized medical records for all UK residents living within the regions covered by the contract.

This is directly from the Complaint…I find it very interesting…(the non-italicized words are mine):

The core component of the NHS Contract—the software system called Lorenzo , [NCTracks] intended to enable the digital medical records system—was to be delivered by 2012 [July 1, 2013]. The significance of the NHS Contract to CSC placed the project squarely in the spotlight of Wall Street analysts. Accordingly, virtually all conference calls between the Company and investors and virtually all public announcements during the Class Period addressed the progress and status of the NHS Contract. Throughout the Class Period, Defendants repeatedly asserted that CSC was “on track” and “making progress” and that the contract remained profitable to the Company. Likewise, CSC and the Individual Defendants continuously denied media reports critical of CSC’s performance of the contract. As analyst reports throughout the Class Period demonstrate, investors believed Defendants. However, Defendants’ representations were false because they had known, at least since May 2008, that CSC could not deliver the Lorenzo system [NCTracks] as promised. The Class Period begins on August 5, 2008, the date of Defendants’ first public misstatements following May 2008. Lead Plaintiff’s investigation has revealed that, as of May 2008, CSC and the Individual Defendants knew that the NHS Contract could not be fulfilled. In early 2008, CSC’s Board of Directors dispatched an internal team of experts to the UK to review progress on the NHS Contract. The team concluded that “from a technology and operational perspective,” CSC could not perform the NHS Contract [NCTracks]. The members of the team were in agreement that CSC simply could not deliver the software necessary to perform under the contract. As such, the contract was a “loser,” and, per Generally Accepted Accounting Principles (“GAAP”), CSC should have recognized a loss on the NHS Contract in 2008. CSC and the Individual Defendants concealed these facts from the public, and have never taken a loss on the contract. In the midst of public scrutiny, the UK Government commenced an investigation through a committee of Parliament with oversight over public spending. The committee reached similar conclusions: CSC could not deliver on the NHS Contract. Indeed, the Parliamentary inquiry revealed evidence that CSC had likely known it could not deliver since 2006.

If I am reading the allegations correctly, the plaintiffs asserted that CSC promised a computer program regarding electronic patient records that CSC knew it could not deliver.

Hmmmmmmm….

As an aside, CSC’s reported revenue for fiscal year 2011 (ending April 1, 2011) was $16.04 billion, and net income attributable to CSC shareholders was $740 million. CSC common stock is listed and trades on the NYSE under the ticker symbol “CSC.”

 Companies deal with marketing/products failures every day.  Just look at Cosmo’s yogurt failure. Or Coca-Cola’s “New Coke” flop.

Cosmo pulled the yogurt off the market within 18 months.  Consumers demanded that Coca-Cola return to the original Coke recipe.

Could it be possible that CSC has 2 product failures???

The Lorenzo system???

AND

NCTracks????

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on September 26, 2013, in Accountability, Affordable Care Act, Aldona Wos, Computer Sciences Corporation, DHHS, Gov. Pat McCrory, Health Care Providers and Services, Lawsuit, McCrory, Medicaid, Medicaid Billing, Medicaid Reimbursements, Medicaid Services, Medicare, NCTrack Glitches, NCTracks, NCTracks Billing Issues, North Carolina, Perdue, Timely Payments and tagged , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 1 Comment.

  1. I don’t understand how shareholders sue companies (other than for specific performance) and profit from it. It seems a bit like suing one’s self. If I sue company ABC, and I own 10% of the stock therein, the apportioned liability should be equal to my apportioned settlement, shouldn’t it?

    I guess if it’s covered under insurance (D&O or E&O coverage) I could see it, but short of that it seems like a net loss for the shareholders. In addition to the fact that the value of any settlement are going to be levied against the value they hold in the company, there are also costs of defense, administration, and so on that must also be levied, and those are in addition to the cost of the settlement itself.

    It just seems a bit peculiar to me.

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