Ohio unemployment overhaul on hold after contractors’ indictment

Ohio unemployment overhaul on hold after contractors’ indictment
Published: Sep. 26, 2022 at 11:36 AM EDT
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CINCINNATI (ENQUIRER) - Federal investigators say two executives from the company that Ohio hired to overhaul its unemployment compensation system stole trade secrets from their former employer, according to the Cincinnati Enquirer.

The news prompted the Ohio Department of Job and Family Services to put the state’s unemployment fixes on hold for now.

In 2018, Ohio awarded Minnesota-based Sagitec Solutions an $86 million contract to update the state’s unemployment compensation system. The overhaul was planned before Gov. Mike DeWine closed businesses to prevent the spread of COVID-19 in 2020, ballooning the unemployment rolls and forcing the state to spend millions on other contractors.

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.

In 2015, Sagitec won a contract with West Virginia and Maryland to update their unemployment systems. Federal investigators say Minkkinen and Sambasivam used Deloitte materials to win that bid. It’s not clear if Ohio is in a similar spot.

Kentucky unemployment officials awarded a contract to Sagitec in May but went months without hearing back from the vendor, according to the Louisville Courier-Journal.

Will the indictment affect Ohio’s ability to fix unemployment system’s problems on time?

Sagitec isn’t done with the job, announcing in a May news release that it completed the first phase of collecting unemployment taxes. The next phase would fix the website that most Ohioans use to claim unemployment benefits, per the Enquirer.

“We’re aware of the allegations and have put our project on hold while we consider the implications to our unemployment insurance modernization project,” Ohio Department of Job and Family Services spokesman Bill Teets said.

A Sagitec spokesperson said the company was confident in its ability to meet its ongoing commitment to customers, including the state of Ohio. The company conducted an internal investigation, which it shared with federal investigators, and strengthened compliance protocols.

“Sagitec was not indicted in this matter and there’s no indication that any other employees are the targets of the government’s investigators,” according to the spokesperson. “While we are actively working with the government on this matter, we continue to operate normally.”

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