No Accountability, Unethical Practices Cost OneCarolina, USC Millions

March 21, 2016

Investigative Reports

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By RON AIKEN

Beach houses, pyramid schemes, mismanagement riddle $80M program

As the University of South Carolina has formally put the brakes – or, “hit the pause button,” as it said in a statement – on the HR and payroll components of the ambitious OneCarolina implementation that resulted in the firing last week of approximately 40 consultants and contractors, the layers are beginning to peel off an embattled University Technology Services (UTS) department.

Today The Nerve can reveal:

  • The top executive running OneCarolina and the current head of USC’s human resources department were running an outside multi-level marketing business that recruited subordinates to join and/or hand over business contacts;
  • the same IT executive purchased a $69,000 piece of a luxury waterfront development on Bald Head Island in North Carolina just months after the man who sold USC a $42.5 million software suite bought four units for himself;
  • and where a debatable decision to switch major software vendors midway through the installation led to conflicts between old managers and new consultants, stopped the HR/Payroll rollout in its tracks and will cost the university additional millions.

Sources inside the program past and present say the $80 million “zoo” OneCarolina has become is the result of system-wide failures of oversight, accountability, decision-making and leadership that have led to the waste of tens millions of dollars – with no end in sight – at the state’s largest university.

A BIG IDEA

The OneCarolina idea made sense.

For as ambitious as it sounded, the push to modernize all facets of a large university – academic grant management, student registration and fee payment (even parking tickets), departmental business orders and procurement, human resources, payroll – was a job that needed doing in a digital world. Called Enterprise Resource Planning (ERP), universities around the country and world were doing it, and the time seemed right to put all the university’s computer systems under one umbrella. That’s what USC did when it issued USC-RFP-0943-BB in December 2006 seeking proposals to run its ERP project.

Immediately, OneCarolina faced problems that would foreshadow things to come. Oracle (PeopleSoft), which bid on the project along with SunGard/Ellucian (Banner), was ruled to have submitted a non-responsive proposal and disqualified. Oracle protested, was ruled against, then appealed that decision to the South Carolina Procurement Review Panel, which finally sustained the disqualification in December 2007.

Defeated for the moment, Oracle would have its revenge.

With the project already behind and the country in the midst of the Great Recession, a decision was made to delay the implementation of Phase I, which was the student services side of the Banner software suite. That piece finally received approval to begin from the Board of Trustees on Oct. 4, 2013, when it approved a total Phase I project budget of $34.8 million.

The agreement was seen as a win by all parties, especially SunGard/Ellucian and lead salesman Lynn Derrick, who made hundreds of thousands in commission from the sale, according to multiple sources. It was also a win for USC’s Deputy CIO and associate vice president Jeff Farnham, a friend of Derrick who would be the man guiding OneCarolina’s direction almost single-handedly from that point forward.

“Jeff Farnham is OneCarolina,” a decade-plus veteran of University Technology Systems (UTS)  said. “There’s nothing that happens on that project that he doesn’t oversee or have his hand in or hired the person in charge.

'No longer updated'

‘No longer updated’

“His boss, Bill Hogue, is the CIO for the entire university, so he’s disconnected from any day-to-day oversight of UTS, which has been the office responsible for implementing OneCarolina. It’s been Jeff’s show from Day One, and from Day One it’s been a zoo, just an absolute zoo.

“It’s Innovista all over again.”

To understand how the OneCarolina project reached its nadir last week – at which USC had to admit total failure and fire the 35-plus contractors and three key management personnel working on the HR/Payroll implementation who had been with the project for years (basically starting over from scratch) – requires an understanding of just how little oversight the project has had.

How little oversight has there been? So little that Farnham for years has used his authority to induce subordinates to participate in a pyramid scheme called ACN.

TRACY’S STORY

Tracy (not her real name) was a recent hire at UTS as an administrative assistant. Having been out of work for the past 11 months and receiving no child support from her ex, she was eager to make the most of this opportunity and a good impression on her colleagues.

One afternoon she found herself in the office with Farnham the only one else around.

Jeff Farnham

Jeff Farnham

“He walked over to my desk and said, ‘Come with me,’” Tracy said. “I said ‘OK,’ and we went down two floors and into this small office with no windows. It was like a large closet, really, just a small, windowless office.

“He then closed the door behind him and I immediately panicked. I’ve been in a vulnerable position once before with a male supervisor, and it was extremely uncomfortable.’

“But he gestured to his head and said ‘I’m going to take off my work hat and ask you to do something for me.’ He said he had a business opportunity he wanted me to consider and invited me to a gathering.

“In that moment, to get out of the room, I said I’d go. I made a meager salary, and here was my boss’ boss telling me he had a way to make more money and I thought it could also maybe help me move ahead at work.”

That “opportunity” was to join a multi-level marketing business called American Communications Network, or ACN, that operates like a pyramid scheme in that people make money by signing up other people and kicking that money back up the pyramidal structure.

It is technically legal because there is a real product behind the pitch – ACN sells phone and internet services – but it functions like a pyramid scheme because far more money is made from signing up new people, beginning with one’s family and friends, than from sales of the actual product, the returns on which are almost negligible.

One industry website reports ACN’s percentage commission on phone sales as 2 percent, meaning that with a $30 phone bill a person would have to sign up 160 customers just to earn $100 a month.

ACN recruits members, or “reps,” by inviting prospects to “blowouts,” which are big meetings at a member’s home. In Tracy’s case, that meeting was at the house of USC’s current vice president for Human Resources Chris Byrd, though at the time Byrd was the director of budgets and HR for UTS, a Farnham hire and friend from Lexington Presbyterian Church, where both men still attend.

In an email obtained by The Nerve between Farham and Tracy, that meeting took place on Nov. 8 at 6:30 p.m. with an address of 229 Platinum Rd., Lexington. A search of property records in Lexington County confirms that address is owned by Byrd.

Chris Byrd

Chris Byrd

Tracy says the meeting was attended by approximately 30 people, including Byrd, Farnham, Stan Lawrimore (executive director of data center services at USC) and Thomas Kennedy, among other people she didn’t recognize.

At the “blowout,” recruits watched a video that featured Donald Trump (who has since scrubbed his affiliation with the group after beginning his run for president and downplayed his role in it in published interviews). After the video, they were talked to individually and given a high-pressure sales pitch to pay $499 that night to become a rep.

“It was a lot of money for me and at that moment I didn’t have it in the bank,” Tracy said. “But I thought, if all these big USC people were doing it, I’m here at this nice house, it has to be something that’s OK.”

The next day, Tracy got a jubilant email from Farnham’s personal account (and copied to Byrd’s email) in her inbox with a congratulations (“We are so excited you are now a part of the ACN Family”), instructions on how to prepare a list of business contacts and some words of caution.

“Don’t talk about this opportunity with anyone you plan to invite no matter how tempted or excited you are,” it read. “Talking prematurely has proven to slow down the launch process. You want folks to get the benefit of experiencing a home meeting (just like you did) as their first introduction to ACN. This will become very clear when you go to training and see why.”

“Again congrats and we look forward to working with you.
Jeff, Sharon and our ACN Team.”

That “family” immediately broke its promises to Tracy. Because of her precarious financial position, she had only written the check with the assurance from Byrd that it would not be deposited until the first pay period in December, she said.

“I was with Chris Byrd eyeball-to-eyeball and said, ‘Please don’t cash this check until December 2nd, and he said ‘Don’t worry about it, don’t worry about it. I won’t.’ I made it absolutely clear to him. I held it tight in my hand before I let go to make sure I was clear, and it was deposited early anyway.”

The check subsequently bounced, sending her account into a negative tailspin that caused other checks to bounce, key bills to go unpaid and fees to mount.

ACN entry in bank statement

“I was devastated,” she said. “It ruined my Christmas with my child. It ruined my credit by signing up under pressure then them not honoring their word. It bounced my car payment, my insurance. I felt broken and betrayed.

“The day before Christmas break I was in tears leaving the office and Jeff invited me into his office and I told him I wanted out,” she said “He offered me a $100 bridge loan. I said I’ll take it – I needed anything at that point. Then lo and behold, he sent me a Facebook message the first week of January asking for his money back.”

A CLOSED LOOP

Like others The Nerve has spoken to in the past week who have knowledge of the ACN operation inside UTS, Tracy said the powerful positions Byrd and Farnham hold made reporting her problems and the problems of others tantamount to career suicide.

“The HR rep in my department was Chris,” Tracy said. “And Jeff was the boss. At the time there was a Sharepoint site for whistleblowers on campus, but it was our office that maintained the site, so that wasn’t an option because I feared those same people would see it.”

The opportunity for Tracy – or anyone else – to speak out against the practices at UTS was further squelched when Byrd, with Farnham’s approval, became vice president for the entire university’s human resource division on Feb. 16, 2011.

“How could I say anything then and keep my job?,” Tracy said. “How could anyone? Later on the university added an ‘integrity line’ after I left for people to address workplace concerns anonymously, but guess whose office that information goes to? Chris Byrd’s.”

Eventually, Tracy was able to get her money back after receiving a curt email message from Byrd and following a time-consuming, convoluted process with ACN’s corporate office designed to discourage those who back out.

After the incident, things at work went downhill for Tracy. During her annual review in April 2011, she asked about a salary increase and was given some advice from Farnham.

“He said, ‘Pray on it,’” she said. Tracy was not given the increase.

It would be one thing if Tracy were alone, an isolated case that’s easily dismissed.

She isn’t.

Multiple sources confirm that a director-level employee with years of experience was asked by Farnham to turn over business contacts from a member of her family who owns a large, successful company. She refused, and months later she was demoted from a director position and reassigned other duties.

“She paid a price,” a current employee at UTS who wishes to remain anonymous told The Nerve. “I know of three people personally who refused and who subsequently, things went poorly for.”

“How can a director get away with taking money from his employees?” the source asks rhetorically. Answer: “If your best friend is the HR director and your boss (Hogue) takes everything you say at face value.”

Farnham currently makes $192,080. Byrd currently makes $230,449, which puts him in the top 150 highest-paid employees in all of state government. At the time she was approached, Tracy made $26,000.

When reached for this story, both Byrd and Farnham declined to answer specific questions and issued joint statements through the university’s public relations department:

Statement from Jeff Farnham:

“Any business interests outside of the university have been disclosed to my supervisor according to state HR policy. They do not impact my performance nor do they influence my treatment of co-workers, subordinate or otherwise.”

Statement from Chris Byrd:

“I have not been involved in or associated with ACN in many years and I have always disclosed any outside business interests according to state HR policy. They have not impacted my performance nor have they influenced my treatment of co-workers, subordinate or otherwise.”

Neither Farnham nor Byrd answered whether they had ever recruited subordinates to join ACN or ever took money from a subordinate for ACN purposes.

“I never got an apology for bouncing my check from Jeff or Chris,” Tracy said. “Not even one ‘I’m sorry.'”

TOO CLOSE FOR COMFORT?

The friendship between Farnham and current Oracle salesman Lynn Derrick is close. They follow each other on Twitter, are Facebook friends and are in each other’s Google+ circle. They comment on each other’s posts online, and Farnham attended the wedding of Derrick’s son.

The two men grew close during the initial Banner sale, multiple sources say, and after the sale was finalized they became even closer by becoming investors in the same beachfront resort.

Farnham and Lynn Derrick.

Farnham and Derrick on Bald Head Island.

A review of deeds and property records of Brunswick County, N.C., show that Lynn Derrick and his wife bought four units (10C, 10G, 10J and 8J) in the fractional ownership development called the Marsh Harbour Inn on Bald Head Island, N.C.,  in January and February of 2010 – two months after the close of the Banner deal. Records show Derrick paid a total of $197,000 for all four.

Just three months later, in May 2010, Farnham himself was on the island, signing papers to purchase unit 8E (near Derrick’s 8J) for $69,000.

The timing of the purchase had nothing to do with the deal, Farnham said in a statement to The Nerve.

“Mr. Derrick played no role in the sale other than making me aware that it was available,” he wrote.

That was mid 2010.

In November 2011, Derrick resigned from SunGard/Ellucian to go to work for his former competitor, Oracle. Over the course of 2012 Farnham’s team decided that the Banner modules it already had purchased for the job “would not yield the quality of services USC needs” for its HR and Finance needs despite Banner’s HR, finance and payroll programs being used successfully at more than 2,400 institutions in 40 countries.

And so, with the consent of Hogue, the school issued USC-RFP-2305-BB on Oct. 4, 2012, to “provide human resource, payroll and finance solutions and/or services for the University of South Carolina.”

Derrick was in the room representing Oracle at the pre-bid meeting, and Oracle got the contract worth an estimated $34.8 million at the time over five interested vendors. That figure has since grown exponentially due to multiple implementation crises (including the current halting of the HR and payroll installations), but USC has not made the most-recent numbers available to The Nerve despite multiple requests.

The answer that Ellucian’s products did not meet USC’s standards falls flat on those familiar with the implementation process.

“If they thought it wouldn’t work, why did they spend millions on it in the first place?” the decade-plus manager said. “That’s not what they said in 2010 about Banner. It hung the moon.

“You tell me the sense it makes to put half of your systems on one program and half on another? It’s more expensive, it wastes time and it leads to exactly the problems they’re having now. They should call OneCarolina ‘TwoCarolina’ because it’s two software systems when it was supposed to be one. That’s the whole idea behind ‘one,’ right?”

Insiders say the decision to switch vendors was swallowed hook, line and sinker by USC’s leadership without examining the additional costs of replacing software functionality it already had purchased, recruiting a whole team of new consultants and training hundreds of USC employees at all eight campuses on two very different software systems.

“There is no accountability at UTS for OneCarolina and there hasn’t been since Day One,” the manager said. “They had no plan. They still have no plan. They had an idea, and they left it to Jeff to implement. When he told them they needed to switch to Oracle, they said ‘OK.’ When he said the delays are normal, they said ‘OK.’ Only last week did they finally admit just how bad it’s gotten, and they’re still not telling the whole story.”

“Jeff Farnham has been given a free hand to do as he pleases,” said a current frustrated employee who contacted The Nerve last week.

“There is no oversight. Dr. Hogue has taken a hands-off approach in his management, and Farnham has no clue what he is doing with OneCarolina’s problems.

“You just don’t change vendors midway through, then you don’t have the same management people who oversaw the first program’s implementation manage the developers from the new company. Immediately, the good PeopleSoft developers quit because Farnham’s Banner group had no idea how to implement PeopleSoft functionalities and wouldn’t listen to what they were being told.”

According to the decade-plus manager, in the early 2000s USC had in its hands an elegant, in-house solution to the ERP problem.

“All we had to do was use inexpensive interfaces we could program ourselves running off our existing, very robust mainframe,” he said. “We put a lot of time and money in the 1990s making that mainframe one of the best anywhere. But Farnham rejected that because he hated mainframes and called them ‘green screens.’ He couldn’t see that we could improve the interfaces ourselves despite being told that, so he went a different direction, which is where OneCarolina comes from.”

He said OneCarolina has devolved into a string of cascading failures and escalating costs for some pretty simple reasons.

“In its simplest terms, here’s the scenario: You buy a product, work out the rough spots and implement it,” he said. “OK? Then you buy another one for no good reason, yet you keep the old managers who don’t understand the new product. That frustrates the good developers who came with the new software to help you. They say ‘to hell with it’ and leave and they’re replaced with visa workers who are less skilled and who have communication problems.

“It was like adding accelerant to an inferno. You’re running through consultants like wildfire while you trying to install and debug two completely different software systems. Then when it starts going haywire, especially with finance, they don’t have enough people to put out the fires that are burning. It’s no wonder they can’t make a dent in the HR and payroll programs because they’re in such a mess with finance.

“So you have all these millions of dollars wasted on software they didn’t need and could have implemented with the team they had for far, far less than they’ve ended up paying Oracle and PeopleSoft consultants together. It’s a complete mess, and I don’t know how in the world they’re going to get out of it with the crew they have in there now who say things are going great and nobody in leadership cares enough about the employees who are suffering across campus because of it to even lift a finger.”

USC president Harris Pastides has refused multiple requests from The Nerve for answers to questions about OneCarolina. The only answer Hogue addressed of many questions he was asked was that he had not participated in ACN. He did not respond to any questions relating to his knowledge of the practice of recruiting subordinates, taking money from them or conducting outside business on USC time.

Reach Aiken at 803-254-4411 or email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC. Sign up for email alerts to receive breaking news at the top right-hand side of the page.

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