After a recent ruling in a New York court, Citicorp and a state social service agency have revived their plan to administer an electronic benefits transfer program.
On Nov. 20, a New York appellate court overturned a ruling that had halted the project run by the state Office of Temporary and Disability Assistance.
The reversal opened the door for Citicorp's Citibank unit to serve 1.7 million cash-benefit and food stamp recipients.
Transactive Corp. and the Check Cashers Association of New York had challenged the bidding procedure under which Citibank won a contract for the work. Last June, a lower state court froze the planned program and forbade the social service agency to work with Citibank, pending the appellate ruling.
Citibank and the state have resumed discussions about a pilot program in Staten Island and parts of Manhattan, with the first cards tentatively scheduled to reach people next summer, according to Theresa Wescott, a spokeswoman for the agency.
"We're ecstatic," Ms. Wescott said. "We were confident that it would go in our favor."
Mark E. MacKenzie, executive director of Citibank EBT Services, said it will work closely with the state to "make sure the various project attributes and milestones can be identified and met."
The appellate court found "no favoritism, fraud, and corruption" in the awarding of the contract to Citibank. "There is no material or substantial irregularity in the bidding process which undermined the fairness of the competition," it ruled.
Citibank was chosen in February 1996 as EBT contractor for the Northeast Coalition, seven states that had banded together to take advantage of economies of scale. Citibank's seven-year contract is estimated to be worth $1 billion. The other six states were not involved in the New York dispute and have been proceeding on their own EBT schedules. The legal wrangle will end up delaying the New York rollout almost a year, said Ms. Wescott. The pilot test was to have begun this fall.
Under the contract with Citibank, the state estimates it will save $2.3 million a month-partly as a result of not having to mail paper checks and issue paper food stamps-once all of New York is on-line by the end of 1999.
For Transactive, an Austin, Tex., subsidiary of Gtech Corp., the decision was another setback in its attempt to gain ground on Citibank, which has contracts to perform EBT in 27 states. "We're disappointed, and we're reviewing the decision," said Marc Palazzo, a spokesman for Transactive.
Such delays can be costly for all parties in a business fraught with lawsuits. "The truth of the matter is that everyone is suing everyone else," said David Robertson, president of The Nilson Report, an electronic payments newsletter based in Oxnard, Calif. "No one is above the fray."
