THE government yesterday revealed that it is being sued by rogue IT company NetServ Caribbean, which claimed ownership of the software used by its collapsed Jamaican subsidiary and said that it will settle the matter out of court.

Information Minister Colin Campbell, briefing reporters after the weekly meeting of the cabinet, could not immediately provide details of the NetServ claim, including how much was being sought by Paul Pereira’s outfit, although the matter was the subject of a report to the National Investment Bank of Jamaica (NIBJ) by NetServ Jamaica’s receiver, John Lee.

However, Campbell said that the administration had opted to settle the claim, apparently lodged in the Florida court, so as to avoid “expensive legal fees”.

“There is a claim in a US court and there is an attempt to settle it out of court,” Campbell said.

NetServ was one of the companies on which the government had staked its now abandoned premise of creating 40,000 jobs in the information technology sector over a three-year period, luring investors through soft loans from its billion-dollar Intech fund, using the proceeds from the sale of cellular telephone licences.

NetServ promised to create 10,000 jobs and the company was promised loans for approximately $200 million, plus grants for the training of staff.

It turned out the NIBJ disbursed the first $95 million to NetServ, which was to establish a call centre in Jamaica, using cutting-edge technology, before any serious due-diligence was completed on either the company or its principal, Paul Pereira.

Even when reports surfaced raising vexing questions about the business practices of Pereira and his partners — including the fact that a NetServ-associated company that raised money for the venture had been warned off by the Irish central bank — the committee that oversaw the Intech fund decided to continue with the project. Ostensibly, though, it tightened procedures for the disbursement of cash.

But last December, a mere six months after it began operating, NetServ had collapsed, having run out of cash and unable to meet its bills. The NIBJ sent in Lee, a partner in the accounting firm, PriceWaterhouseCoopers, to take over the company.

Pereira claimed that bad publicity about the company, because of an Opposition campaign, plus last July’s violence in Kingston had turned off potential investors and that the problem of finding new cash was exacerbated by the September 11 terrorist attacks in the United States.

Lee had hinted at the potential for the lawsuit from Pereira over the ownership of the software in his first interim report to the NIBJ, which was released by the state investment bank in early January.

Pereira, Lee said, had acknowledged NetServ Jamaica’s ownership of assets in Kingston and at the head office in Florida “subject to an unsubstantiated claim to certain intellectual property rights in the software said to reside in the equipment”.

The NetServ operations, integrating networks manufactured by the large US telecoms company NEC and the software developer Active Link, was based on Internet Protocol technology, which was to enable the carrying of voice, data and video communication over a single, Internet-based network.

NEC last August said that the NetServ Jamaica operation would be the first in the Caribbean to be based on Internet Protocol and that the technology would have allowed the firm to “significantly reduce its toll-call expenses as well as simplify the management of its communications infrastructure without impacting the reliability and functionality it demands”.

It is apparently that IP protocol, as configured for the project, that Pereira has now claimed and that the government is apparently willing to accede that he owns.

Meantime, a review of the Intech fund by the auditor-general, which was asked for by Technology Minister Phillip Paulwell after the scandal, should be completed this week, Campbell indicated.

Campbell said that the auditor-general, Adrian Strachan, has finished his review of documents and had posed questions to relevant agencies.

Those agencies, the information minister said, should have provided responses yesterday “for final completion of the auditor-general’s report sometime between Wednesday and Friday this week”.

Paulwell has rejected wrongdoing in any of the IT projects, declaring in Parliament in December that “my hands are clean”.

Prime Minister P J Patterson, in supporting Paulwell, suggested that it was exuberance on the part of the 40-year-old minister that caused him to be less-than-thorough in the handling of the NetServ issue, but he did suggest that he would jettison the minister if the Strachan report showed something different.

Paulwell last month denied signing a memorandum of understanding, which, based on the letter of undertaking from NIBJ president, Rex James to Pereira, was what underpinned his decision to finalise the loan to NetServ.