SAP software "hastened" company's demise
Bankruptcy trustee launches $500 million law-suit
SAP has been ambushed with a $500 million law suit from the bankruptcy trustees of drug distributor who allege the company's R3 software hastened the company's collapse. Bart A.Brown Jr., Chapter 7 trustee for FoxMeyer, accuses SAP of fraud, negligence and breach of contract. The trustee is claiming $500 million in compensation, punitive damages and legal fees. In July, the trustee sued Andersen Consulting, the firm that implemented the SAP software at FoxMeyer, also for $500 million. At its peak, Texas-based FoxMeyer turned over $5 billion a year. The company went bust in March 1997, after failing to climb out of Chapter 11 ( which gives breathing space from creditors while companies attempt to restructure). According to the bankruptcy trustee, FoxMeyer signed a deal to buy SAP's R/3 in 1993. The system cost more than $36 million, $5 million of which was in software fees, the trustee alleges. ® Under the agreement, FoxMeyer would integrate all its logistics operations into one R/3 system. The trustees alleges that SAP told FoxMeyer in 1994 that R/3 was able to process invoices at only six of 23 warehouses. Even worse, the system could handle only 10,000 customer orders a night, compared with 420,000 under FoxMeyer's previous system, the trustee said.