Judge orders IBM to post $25M bond in Indiana welfare case

IBM Corp. must post a $25 million bond as it appeals a $78 million judgment in a long-running case that stems from the company's failed effort to automate much of Indiana's welfare services, a judge has ruled.

Marion Superior Court Judge Heather Welch issued the order Tuesday while granting IBM's request to halt enforcement of the full monetary judgment as its appeal is pending. The company has two weeks to post the $25 million, which is Indiana's maximum for an appeals bond.

Armonk, New York-based IBM has appealed Welch's finding in August that the technology and consulting giant owes Indiana $78 million in damages from its botched attempt to privatize and automate the processing of Indiana's welfare applications.

The judge said in Tuesday's order that IBM had argued that its "financial strength proves that it will have the means to pay" about $90 million—the amount the award is expected to grow to, with interest, over the two years its appeal will likely take before Indiana's Court of Appeals.

She noted in approving the $25 million bond that Indiana's attorneys had sought "more certainty" that IBM would be able pay up if its appeal fails. But Welch wrote that Indiana's concerns about IBM's long-term viability, and its ability to pay the full amount, seem "highly unlikely except under extreme circumstances" given the company's annual revenues in the billions of dollars.

"To no longer be viable, IBM would have to suffer a disaster or Enron-Ievel scandal to no longer be a viable company in the approximately two-year appeal process," she wrote.

John Maley, a private attorney representing Indiana, praised the judge's "prompt ruling" coming a month after she heard arguments in the matter. "We're pleased that IBM, like all others, is required to post this bond," he said Wednesday.

IBM spokesman Clint Roswell said the company is happy with the ruling, and planned to release a statement later Wednesday.

Indiana and IBM sued each other in 2010 after then-Gov. Mitch Daniels cancelled the company's $1.3 billion contract under which an IBM-led team of vendors worked to process applications for food stamps, Medicaid and other benefits.

Indiana pulled that contract in late 2009, less than three years into the 10-year deal, following complaints about long wait times, lost documents and improper rejections.

The Indiana Supreme Court ruled in 2016 that IBM breached its contract and directed the trial court to calculate the damages. The justices affirmed an award of nearly $50 million to IBM in state fees, but allowed Indiana to seek more than $172 million in damages from IBM.