Oregon sues Oracle Corp. over state’s troubled Cover Oregon health insurance exchange

SALEM, Ore. – The state of Oregon filed a lawsuit Friday against Oracle Corp. and several of its executives over the technology company’s role in creating the troubled website for the state’s online health insurance exchange.

The lawsuit, filed in Marion County Circuit Court in Salem, seeks more than $200 million in damages and alleges that Oracle officials made false statements, breached contracts and engaged in “a pattern of racketeering activity.”

Oracle was the largest technology contractor working on Oregon’s health insurance enrolmentwebsite, known as Cover Oregon. The public website was never launched, forcing the state to hire hundreds of workers to process paper applications by hand. The website’s failure became a political problem to Democratic Gov. John Kitzhaber, who is running for re-election.

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

In addition to the company, the state’s lawsuit individually names six Oracle executives, including President and Chief Financial Officer Safra Catz, and Mythics Inc., which acted as a middleman between Oracle and the state.

In a statement, Oracle called the lawsuit “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 health care project,” the company’s statement said. “Oracle is confident that the truth — and Oracle — will prevail in this action.”

Oracle filed its own lawsuit Aug. 8 in federal court alleging breach of contract and seeking payment of more than $23 million in disputed bills. The Redwood City, California, company blames Oregon for the website’s failure, saying the state had incompetent and indecisive staff.

Oracle also faults Oregon’s decision not to hire a systems integrator, which acts as a sort of general contractor to integrate various technology components. The state’s lawsuit says it was Oracle employees who persuaded the state to forego hiring a systems integrator.

“Today, after months of investigation, the attorney general’s findings go well beyond disappointing and incomplete work,” Kitzhaber said in a statement. “The complaint filed contains serious new allegations of fraud, deceit, and corruption by Oracle.”

Instead of signing up for health insurance under the Affordable Care Act in one sitting, Oregonians had to use a hybrid paper-online process that was costly and slow, and the state had to hire more than 400 workers to help them. Altogether, about $250 million in federal funds has been spent on Oregon’s exchange, including technology development, salaries, advertising and rent.

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.

The state decided to stop building the Oracle website earlier this year and transitioned to the federally run enrolmentwebsite.

The FBI and the federal Government Accountability Office are also investigating Oregon’s exchange problems.