Oregon Sues Oracle Over Problem-Plagued Insurance Exchange Site

On Friday, Oregon filed a lawsuit against Oracle America and several of its top executives, accusing the company of fraud and breach-of-contract that cost the state hundreds of millions of dollars and left residents without a functioning state-run insurance exchange website, the Los Angeles Times' "Nation Now" reports (La Ganga, "Nation Now," Los Angeles Times, 8/22).

Background

Oregon's lawsuit comes two weeks after Oracle filed a breach-of-contract lawsuit against the state, alleging that state officials were continuing to use the technology firm's software despite $23 million in unpaid bills. Oracle -- which already has received $130 million for its work -- is seeking $23 million plus interest and additional unspecified damages.

In March, Oregon severed ties with Oracle because the site it developed, Cover Oregon, was so plagued by technological glitches that no residents had been able to enroll in coverage online. A month later, Cover Oregon acting Chief Information Officer Alex Pettit recommended that the state close its exchange website and switch over to HealthCare.gov. Recently, Cover Oregon signed an $18.4 million contract with Deloitte Consulting to act as the state's systems integrator as it moves over to the federal exchange site for the upcoming open enrollment period (California Healthline, 8/11). The Government Accountability Office and the FBI are investigating the state's exchange problems, according to the AP/Miami Herald (Cooper, AP/Miami Herald, 8/22).

Lawsuit Details

The state is making 14 different claims for relief against Oracle, which in total would amount to $5.5 billion in damages and penalties, not counting legal fees, according to "Nation Now."

In a 126-page complaint, filed in Marion County Circuit Court, Oregon Attorney General Ellen Rosenblum (D) accused Oracle of not delivering on its contractual obligations and filing about $240 million in false claims ("Nation Now," Los Angeles Times, 8/22). The lawsuit contends that the company "continu[ed] to promise what it could not deliver and willfully refus[ed] to honor its warranty to fix its errors without charge" (Budnick, Oregonian, 8/23).

Rosenblum said the company "repeatedly lied and defrauded the state" ("Nation Now," Los Angeles Times, 8/22). Specifically, the lawsuit contends that Oracle was engaged in a "pattern of racketeering activity by committing or attempting to commit the crimes of unsworn falsification ... and fraudulently obtaining a signature" (Oregonian, 8/23). In addition, the state contends that Oracle made false statements about the capabilities of its software components, falsified a demonstration of the exchange website for the state exchange board about three months prior to the exchange website's scheduled launch and continued to lie about the exchange's progress through February (AP/Miami Herald, 8/22).

Further, the complaint cites a whistleblower as alleging that Oracle "planned ... a behind-the-scenes effort" to pressure the state to not hire an external systems integrator to oversee the development of the state's exchange site (Carson, Reuters, 8/22). The state said that while it had planned to hire someone for such a position, "Oracle was dead set against" the idea and "convinced the state to spend millions of dollars more to use Oracle Consulting Services to design, plan, integrate and manage the projects."

As a result, the state said it had suffered additional damages by having to hire and train hundreds of new employees to manually enroll residents in private health insurance, Medicaid and other programs via paper applications.

Reaction

Rosenblum in a statement said, "Today's lawsuit clearly explains how egregiously Oracle has disserved Oregonians and our state agencies." She added, "Through this legal action, we intend to make our state whole, and make sure taxpayers aren't left holding the bag."

Meanwhile, Oracle called the state's lawsuit "a desperate attempt to deflect blame from Cover Oregon and the Governor for their failures to manage a complex IT project." The company added that the suit "is a fictional account of the Oregon Healthcare Project" and that the company "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" ("Nation Now," Los Angeles Times, 8/22).