Oregon files suit against Oracle, developer of faulty health exchange


REUTERS/Stephen Lam/Files

The Oregon Department of Justice on Friday filed suit against the developer of its catastrophically broken health-care exchange, accusing Oracle America Inc. of false statements, fraud and racketeering, among other misdeeds.

In a 126-page filing, Oregon Attorney General Ellen Rosenblum (D) in a Marion County court, says Oracle fraudulently induced Oregon and its health-care exchange, Cover Oregon, into contracts worth hundreds of millions of dollars. In total, the state spent more than $240 million on Oracle; Cover Oregon, a disaster from the start, failed to sign up a single person for health-care coverage through its Web site.

“Over the course of our investigation, it became abundantly clear that Oracle repeatedly lied and defrauded the state. Through this legal action, we intend to make our state whole, and make sure taxpayers aren’t left holding the bag,” Rosenblum said in a statement.

The suit alleges Oracle’s actions cost the state more than $420 million, including payments to other vendors. Rosenblum asked the court to award the state more than $5.5 billion, and to prohibit Oracle from contracting with any public corporation or agency in Oregon in the future.

Oracle has not taken the filing lying down. The company had already sued Oregon for what it says are $23 million in unpaid debts the state owes it. In a statement Friday, the company said Oregon’s suit is a political attempt to shift blame.

“The lawsuit filed today against Oracle by the Attorney General of Oregon is a desperate attempt to deflect blame from Cover Oregon and the Governor for their failures to manage a complex IT project. The complaint is a fictional account of the Oregon Healthcare Project.  Oracle is confident that the truth — and Oracle — will prevail in this action and the one filed by Oracle against Cover Oregon two weeks ago in federal court,” a spokeswoman for the California-based company told The Oregonian.

Oregon’s lawsuit relies at least in part on information from what appears to be a whistle blower inside the company. The suit cites “one developer” who calls Oracle’s programming on behalf of the state “atrocious.” An independent review of Oracle’s product in October 2013, when the Web site launched, said the processes used to build the product “do not meet industry standards.”

“The cost of Oracle’s lies and appalling work is extraordinary,” the complaint says. “The State has and will spend tens of millions more fixing or compensating for Oracle’s failures, including millions of dollars to process paper applications, to create a manual enrollment and insurance eligibility determination process, to transition to the federal health exchange, to fix Medicaid enrollment, to independently assess and repair Oracle’s failures, and to connect to the federal exchange.”

The lawsuit targets several Oracle executives, including Stephen Bartolo, vice president of Engineered Systems and Hardware; Thomas Budnar, vice president for North America Government Consulting; Safra Catz, president and CFO; Kevin Curry, a former Group Vice President for North America Public Sector; Brian Kim, a technical manager; and Ravi Puri, a senior vice president for North America Technology and Government Consulting.

Rosenblum’s office has contracted with Markowitz, herbold, Glade & Mehlhaf, a Portland-based firm, to file the suit. The state issued a $2 million contract to the firm to represent it in court.

Reid Wilson covers state politics and policy for the Washington Post's GovBeat blog. He's a former editor in chief of The Hotline, the premier tip sheet on campaigns and elections, and he's a complete political junkie.
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