Oracle Corp. Sues Oregon Over Botched Health Insurance Exchange, Accuses Kitzhaber Of 'Flogging' Company

Oregon Gov. John Kitzhaber
U.S. President Barack Obama attends a 2010 rally for Oregon Gov. John Kitzhaber. Oracle Corp. accused the governor of "flogging" the company in public after Oregon's Obamacare exchange failed last year.

Just as Oregon attorneys were preparing to sue Oracle Corp. (NYSE:ORCL) over the state’s faulty Obamacare exchange, the tech giant fired the first shot. In a federal complaint this week, the company alleged a breach of contract and accused Gov. John Kitzhaber of leading a “smear campaign” against it.

The state hired Oracle in 2011 to develop the Web portal for Cover Oregon, the place where Oregonians could browse and shop for health insurance plans under the Obama administration’s Affordable Care Act. But last year, when open enrollment began on Oct. 1, the site flopped. It never went live, and residents had to file paper applications to apply for health insurance subsidies, the Los Angeles Times noted Saturday.

After plenty of public finger pointing, Cover Oregon officials decided in April to abandon the insurance portal, despite spending $248 million on it, and instead transitioned to the federal system. In May, Kitzhaber publicly urged the state’s attorney general to sue Oracle.

In Oracle’s 21-page lawsuit, the company contends that Cover Oregon privately sought Oracle’s help in the early months of this year while publicly slandering the tech firm. Oracle’s legal complaint points out First Data, a company hired by Oregon to analyze what went wrong with the insurance portal, “attributed a large part of the problems to Cover Oregon’s mismanagement of the project,” The Oregonian reported.

"While flogging Oracle publicly, Cover Oregon continued privately to ask for Oracle's help. (Indeed it continues to this day to seek Oracle’s technical help with the project),” the complaint said. “Oracle gave that help for many months, in spite of the public excoriation, because it was committed to helping Cover Oregon complete the project and because Cover Oregon repeatedly promised to pay Oracle for its services. In the end, though, Cover Oregon reneged on its promises, thus prompting this lawsuit.”

The complaint also claims Cover Oregon still owes Oracle $23 million under the original contract. In all, the company was paid about $130 million, The Oregonian said.

Cover Oregon did not respond to the Los Angeles’ Times request for comment though Kitzhaber’s office provided a statement.

“The governor is aware of the lawsuit and isn't surprised by it; the state fully expected to end up in litigation over Oracle's failure to deliver,” Kitzhaber spokeswoman Melissa Navas said. “The attorney general's office will review the complaint filed by Oracle and continue to pursue legal remedies on behalf of the state.”

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