Oregon files suit against Oracle for failed health exchange

After promising to attack Oracle within the full extent of the law, the state of Oregon officially filed suit against the company Friday for its role in Cover Oregon, the state’s failed health insurance exchange.

The strongly worded lawsuit alleges that Oracle officials lied to Oregon officials and engaged in acidity that included breached contracts, overcharging for “incompetent work,” hiding the company’s performance from Oregon leadership, making promises it could not deliver and not honoring warranties.

“Oracle’s conduct amounts to a pattern of racketeering activity that has cost the State and Cover Oregon hundreds of millions of dollars,” the suit states.

Oregon was one of more than a dozen states that built its own health exchange in lieu of adopting the federal government’s model. The exchange immediately found itself with a slew of problems, including the inability to allow residents to register for state health care coverage. As a result, the state hired hundreds of workers to process paper applications.

The suit seeks damages of $240 million and penalties as high as $480 million against the company and six executives, including Oracle Chief Financial Officer Safra Catz, for the failed exchange and a social services modernization project that also failed.

“Today’s lawsuit clearly explains how egregiously Oracle has disserved Oregonians and our state agencies,” Oregon Attorney General Ellen Rosenblum said in a statement. “Over the course of our investigation, it became abundantly clear that Oracle repeatedly lied and defrauded the state.”

Oracle has already beaten Oregon to the legal punch. The company filed its own suit on Aug. 8 in federal court that claims the state breached the contract and seeks more than $23 million in disputed bills.

The company released a statement calling Friday’s suit “a desperate attempt to deflect blame from Cover Oregon and the governor for their failures to manage a complex IT project.”

The company contends that Oregon made a bad decision in not hiring a systems integrator for the project, something the state claims Oracle advised it not to do. The company also alleges that Oregon had indecisive and incompetent people on its staff who made it difficult for the company to deliver a properly working solution.

While the mess plays out in court, it has already caused a number of changes within the state. Following the site’s struggles, Gov. John Kitzhaber ordered an internal investigation that led to the resignation or termination of a number of high-ranking state officials, including the project’s chief executive and chief information officer.

The FBI and the federal government’s Government Accountability Office have both opened investigations into the project to look into how federal dollars given to the state for the project were spent.

The state has also scrapped the exchange for the federal government’s option for this year’s enrollment, the only state to make such a decision, although some other states have struggled in creating their own exchange as well.

Despite the exchange’s technology woes, about 454,500 Oregonians have enrolled in coverage through Cover Oregon using the hybrid process. An estimated 97,000 of those enrolled in private health plans, while about 357,500 enrolled in the Oregon Health Plan, the state’s version of Medicaid.