The Oregon attorney general sued Oracle America Inc. on Friday, charging that the technology giant committed what "amounts to a pattern of racketeering activity" that cost the state hundreds of millions of dollars during the faulty rollout of its troubled health insurance exchange.
In a scathing, 126-page civil complaint, Oregon Atty. Gen. Ellen Rosenblum accused the company and several of its high-level executives of repeatedly lying to state officials, of failing to deliver on contracts and of filing an estimated $240 million in false claims after it was hired to build the Cover Oregon website.
"Today's lawsuit clearly explains how egregiously Oracle has disserved Oregonians and our state agencies," Rosenblum said in a written statement. "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."
The Oregon suit comes just weeks after Oracle fired the first legal salvo, suing the state agency operating the exchange for breach of contract and accusing Gov. John Kitzhaber of attempting to "vilify the company in the media."
In that suit, Oracle charged that state officials this year were engaged in a campaign of "constant public slander" against the company at the same time that they were privately asking Oracle to help them fix their system, which never worked. Oracle is a Delaware corporation headquartered in Redwood City, Calif. On Friday, Oracle officials derided Oregon's legal action in a brief but tart emailed statement.
"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 statement said.
"The complaint is a fictional account of the Oregon Healthcare Project," it continued. "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."
Although Oregon embraced President Obama's Affordable Care Act earlier and more enthusiastically than many other states, technology problems plagued Cover Oregon from the beginning. Its Web portal never went live after open enrollment began Oct. 1. Oregon resorted to paper applications to enroll its residents.
"Without the website portal that the State and Cover Oregon had already paid Oracle more than $100,000,000 to build," the state's lawsuit against Oracle said, "Cover Oregon and the State each hired hundreds of additional employees and expedited their training, in order to manually enroll Oregonians in health insurance, Medicaid, and other programs by hand processing paper applications."
In March, Oregon fired Oracle. In April, Cover Oregon officials voted to toss the dysfunctional state exchange and adopt the federal system. The state paid $248 million for a system, officials said, that was doomed.
One major issue was that state officials decided to build the exchange at the same time they were launching a project to modernize their health and human services programs.
In its suit, Oracle blamed Oregon for making serious mistakes. Among them: that it didn't hire a "systems integrator" to manage the ambitious efforts, a decision the company said was akin to building "a massive multi-use downtown skyscraper without an architect or general contractor."
In the Oregon suit filed Friday, Rosenblum said that the state agencies involved in the two major technology projects had planned to hire a systems integrator, but that "Oracle was dead set against" it and engaged in a "behind-the-scenes effort" to dissuade the state.
"Oracle's behind-the-scenes scheme paid off, for Oracle," the Oregon suit said. "Oracle convinced the State to spend millions of dollars more to use Oracle Consulting Services to design, plan, integrate and manage the projects."
Not only was Oracle "responsible for all technology," the state suit argued, "it tightly controlled access to the software development environments, so that the State had to rely on Oracle's demonstrations and reports to learn about Oracle's progress."
The complaint makes 14 separate claims for relief against Oracle, and they come with hundreds of millions of dollars in penalties. If all of the damages and penalties the state seeks are added up, the price tag for what the state calls Oracle's "fraud, racketeering, false claims and broken contracts" would be more than $5.5 billion, plus legal fees.
"There are different damage and penalty amounts listed throughout the lawsuit," Kristina Edmunson, spokeswoman for the attorney general, said in an email. " These damages and penalty amounts are based on the number of actual and anticipated damages, and ultimately, the courts will review these amounts and base its opinion accordingly."
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