News & Politics

Oracle Settles Lawsuits With State of Oregon Over Mismanaged Obamacare Exchange

On September 15, Oregon Governor Kate Brown (D-Portland) announced that all lawsuits and countersuits between software giant Oracle and the state had been settled. The suits were related to the failed state Obamacare exchange known as Cover Oregon. The settlement ends an ugly chapter in state history marked by fraud, waste, and one of the worst advertising campaigns ever foisted on Oregonians.

Oracle settled for a total of $100 million paid to the State of Oregon. The terms of the settlement were reported at OregonLive:

Oracle’s $100 million consists largely of technology. Only $25 million will come in the form of cash. And all of that will go to pay the state’s legal fees and other costs. Oracle also agreed to contribute $10 million to a state technology education program.

All in all, it’s a far cry from the $240 million the state paid to Oracle for the failed Cover Oregon project. The company’s army of IT experts worked for years on the exchange, repeatedly missed deadlines and never produced a functional exchange. In late 2013 and early 2014, Oracle sent in its “A-team” to complete the work. But the first-stringers were no more successful than the junior varsity, state officials claimed. (Oracle disputes this.)

Former Governor John Kitzhaber (D-Roseburg) oversaw the hiring of Oracle to build the Obamacare exchanges. Known as Cover Oregon, the website failed without ever going live, and cost taxpayers a staggering $300 million. The spectacular failure, which took $240 million in state funds and over $60 million in federal funds, sparked a massive finger-pointing campaign, along with several congressional investigations. One state representative even contacted the FBI with suspicions that Cover Oregon had built a fake website that partially worked, in a scheme to get more federal funds.

Oregon officials had envisioned themselves as the future beneficiaries of the first successful state-based health care exchange. Indeed, the Kitzhaber administration was so convinced it would work that they believed every other state in the union would copy their website — and Oregon would reap the benefits.

Kitzhaber, who resigned in disgrace a few months into his unprecedented 4th term as governor, pushed Attorney General Ellen Rosenblum (D-Portland) to sue Oracle in a face-saving move. These suits were filed despite the fact that Oregon failed to draw up the proper contracts.

The timing of the settlement is advantageous for Brown, who is heading into her first attempt to become an elected governor. A lifetime politician with little private sector experience, the Democrat from Multnomah County was appointed governor in February 0f 2015 after Kitzhaber resigned over influence peddling scandals involving himself and his fiancee, Cylvia Hayes. At the time, Brown was serving her second term as secretary of State. Her resume boasts a degree in women’s studies, a JD in environmental law, and a few years in legal practice prior to running for office. She’s been an elected official in Oregon for over 25 years.

Many Oregonians were left wondering why Kitzhaber and Rosenblum insisted on suing Oracle, as the contracts were written solely for time and materials instead of insisting on hard deliverables. This is highly suspect in the world of software contractors. Oregon further failed in its oversight of the project, never having hired a systems integrator to act as “a general contractor with ultimate authority.” (The OregonLive article buries this nugget and minimizes its importance, but this is a vital failure that led to most of the problems with Cover Oregon.)

The OregonLive article states,

It was an aggressive complaint, accusing Oracle and several executives of fraud, filing false claims and racketeering. It sought more than $6 billion in damages.”

The complaint led to discord within the top ranks of Oregon government. Brown, who replaced Kitzhaber in the wake of the Cylvia Hayes influence-peddling scandal, viewed the Oracle beef as a political liability and pressed for a settlement. Brian Shipley, Brown’s former chief of staff, spent hours with Oracle executives in 2015 seeking common ground.

Oracle claimed they’d reached a deal with Shipley and Brown to settle for $25 million worth of software. The governor’s office steadfastly denied it.

The company filed one of its many countersuits against the state claiming it had improperly reneged on the deal.

As more and more insurers leave Obamacare exchanges, and as Obamacare continues to buckle under its own weight, it is important to remember why we are where we are. The editorial board of the Chicago Tribune put it succinctly in a recent opinion piece: “Obamacare failed because it flunked Economics 101 and Human Nature 101.” The meteoric failure of Cover Oregon is a sordid tale of statist collusion, fraud, hubris, and a complete lack of understanding of market forces and technology. It’s no wonder that Kate Brown, who lacks any background in the private sector, technology, or real world management, was so eager to put this behind her.