Ohio fired Sagitec, the company overhauling the state’s unemployment compensation system, after two former Sagitec executives were indicted.
“After careful consideration, the Ohio Department of Job and Family Services is discontinuing its work with Sagitec to build a new unemployment benefits management system,” Director Matt Damschroder said in a statement. “We remain concerned with the criminal allegations against two individuals associated with the company, and its implications on the project.”
Ending the Sagitec contract delays the overhaul of a new unemployment compensation website, which was slated to be completed in fall 2023.
What happened with Sagitec?
In 2018, Ohio awarded Minnesota-based Sagitec Solutions an $81 million contract to update the state’s unemployment compensation system. The website’s flaws were exacerbated when Gov. Mike DeWine shuttered businesses during the COVID-19 pandemic, leading to a surge in unemployment claims that overwhelmed the technology and staff
Ohio spent millions on other contractors to patch various problems. But Ohio continued to work with Sagitec on the underlying issues with the website, which frustrated those seeking unemployment and business owners alike. The state paid $15 million of that contract when two former Sagitec employees were indicted.
In late August, Sagitec partners David Gerald Minkkinen and Sivaraman Sambasivam were indicted and accused of stealing trade secrets from their former employer Deloitte, according to court records filed in the Southern District of West Virginia.
The case stemmed from contracts Sagitec won in 2015 to update unemployment compensation systems in West Virginia and Maryland. Federal investigators say Minkkinen and Sambasivam used Deloitte materials to win that bid.
Ohio put its Sagitec contract on hold in September and cut ties with the company late last week. Kentucky, which also contracted with Sagitec for its unemployment overhaul, faced a similar situation.
