IBM pays almost $15m to settle US government case over Cúram Software

IBM has agreed a deal with US government authorities to pay almost $15 million (€13.4 million) to settle a case over the involvement of its Irish Cúram software unit in a troubled online medical platform for the State of Maryland.

The US attorney’s office for Maryland says IBM has agreed to pay $14.8 million (€13.1 million) to settle allegations made against the company and the Irish unit under the False Claims Act.

IBM did not admit liability for the allegations made against Cúram, while federal prosecutors said the US government did not concede “that its claims were not well founded” under the settlement.

The dispute arose over Cúram’s involvement in the Maryland Health Insurance Exchange (HIX) website, an online platform that was developed for consumers and small businesses in the state to shop around for better health cover. The system crashed on the first day it was launched.

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Settlement

IBM had bought Dublin-headquartered Cúram Software, whose technology helped governments administer welfare services, in late 2011 for more than €100 million. Cúram was originally founded by Irish entrepreneurs John Hearne and Ronan Rooney.

According to details of the settlement outlined by the US attorney’s office, on the same day that the Cúram acquisition closed in December 2011, a tender was submitted for a part of the HIX contract, with Cúram listed as a sub-contractor.

IBM’s newly-acquired Irish company was bidding to provide technology for the platform that would help determine the eligibility of consumers for state assistance for medical cover, and to calculate their entitlement to tax credits.

The US attorney’s office says that the following month, January 2012, Cúram made a presentation to Maryland state authorities, highlighting how its technology worked and how it could be used for HIX and integrated with other technologies on the system.

The tender was accepted and Cúram supplied its services as a sub-contractor. However, “repeated problems” arose with the technology after HIX was launched in late 2013, the US attorney’s office says.

Criticisms

At the time, Maryland authorities said some consumers’ applications for cover had got lost in the system. The poorly-functioning HIX website led to criticisms of the Irish-American then-governor of Maryland, Martin O’Malley.

In 2014, the contract was terminated. Subsequently, US government authorities alleged that Cúram-IBM had made “material misrepresentations” to state authorities during the bidding process.

The US attorney’s office says the alleged misrepresentations were over the “development status” of the Cúram technology; the “existing functionality” of the software; and “the integration of Cúram software with other software needed to provide a properly functioning HIX website”.

IBM-Cúram had always denied any wrongdoing in the case, and the settlement without admitting liability allows the company to avoid further expensive litigation and draw a line under the matter.

A $45 million (€40 million) settlement was previously reached with the main contractor for the HIX website, Noridian.