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By Dawn Kawamoto, 22 May 2003 11:48

NEWS California Governor Gray Davis' policy director has resigned, a move that comes as questions still linger over the debacle involving the state's $95m contract with Oracle. Kari Dohn, who joined Davis' office as policy director four years ago, resigned earlier this week to pursue "new challenges," said Steve Maviglio, a spokesman for the Governor. Maviglio noted that he was not aware whether the Oracle controversy and ensuing investigation by the state attorney general's office had any bearing on her decision. Dohn did not return phone calls, and a representative with Attorney General Bill Lockyer's Office declined to comment. The controversy arose in late 2001, when a state auditor wrote a scathing report that said Oracle's new enterprise licensing agreement would cost California in excess of $40m more than the state's existing licences with the software maker. The report challenged Oracle's claim that the contract would deliver $100m in savings and led to hearings by the state's Joint Legislative Audit Committee, which sought to uncover why such a large deal would get approved in record time and without competitive bids. Submitted as evidence in those hearings was an internal Oracle email in which a sales representative advised a supervisor that Larry Ellison, Oracle's chief executive, should personally thank Gov. Davis for the state's business. The email also suggested that three high-ranking members of the governor's office be complimented for playing an instrumental role in getting the contract approved: Dohn; as well as Arun Baheti, former e-government director; and Elias Cortez, former department of information technology director. Cortez resigned under pressure for the handling of the contract, and Baheti was also forced out for his role in the deal and his handling of a $25,000 campaign contribution to Davis from Oracle. The campaign contributions were eventually returned and the contract cancelled. During the hearings, Dohn said she knew little about the contract and that she never informed Davis about the deal. Representatives from both Davis' and Ellison's office have previously stated that the two men never discussed the contract by phone. The state attorney general's office launched an investigation into the deal while the Joint Legislative Audit Committee hearings were underway, and in January, a grand jury began calling witnesses, such as former audit committee chairman Dean Florez, who spearheaded the committee's investigation. A report in The Sacramento Bee said the focus of the investigation centred on obstruction of justice allegations, in which a calendar submitted for Dohn was alleged to have been altered to remove an entry regarding Ellison. During January, Dohn expressed her desire to quit but was asked to stay on until the budget revisions were completed, Maviglio told CNET News.com.