Oregon's governor seeks to sue contractor over state's failed ObamaCare exchange

Oregon Gov. John Kitzhaber said Thursday he is seeking to file a lawsuit against the contractor who built the state’s failed ObamaCare exchange, but the company says it isn’t to blame.

The Democratic governor asked the state’s attorney general to sue Oracle Corp., the main technology contractor for Cover Oregon, for embarrassing the state and wasting money.

"This is a very serious decision taking on a very large corporation — the second-largest software corporation in the world — but I do not believe they've delivered for the state of Oregon," Kitzhaber told The Associated Press.

Oregon paid Oracle $134 million in federal funds to build what turned out to be a glitch-filled Cover Oregon website, which the state scrapped last month in favor of the federal exchange.

Oregon is the only state that still doesn't have an online portal where the general public can sign up for health insurance in one sitting through a marketplace required under ObamaCare.

In a letter to Attorney General Attorney General Ellen Rosenblum, Kitzhaber said he has fired state managers in charge of Cover Oregon, and now it's time to hold accountable the website's main technology contractor.

Kitzhaber said Rosenblum will make the ultimate decision about whether to file a lawsuit, but he believes the state has strong claims. Rosenblum responded in a letter to the governor that her legal team has been reviewing options and developing legal strategies.

"I share your determination to recover every dollar to which Oregon is entitled," she wrote. Cover Oregon and Oracle have agreed not to initiate legal action before May 31.

Oracle, which is headquartered in Redwood City, California, said in a statement Thursday it was not responsible for the failed launch.

"Contrary to the story the State is promoting, Oracle has never led the Oregon Health Exchange project," Oracle's statement said. "OHA (the Oregon Health Authority) and Cover Oregon were in charge and badly mismanaged the project by consistently failing to deliver requirements in a timely manner and failing to staff the project with skilled personnel."

The governor is trying to shift blame from where it belongs, the company said, adding it is confident an investigation would "completely exonerate Oracle."

In a letter to Cover Oregon's temporary leadership last month, Oracle President and Chief Financial Officer Safra Catz wrote that the company provided "clear and repeated warnings" to Cover Oregon that the exchange website would not be ready to launch last October.

The website's failure has been an embarrassment for the Democratic governor, who enthusiastically embraced Obama's health care law and has for decades been a respected voice on health care policy. Kitzhaber's Republican rival in the November election, state Rep. Dennis Richardson, has made the Cover Oregon problems a centerpiece of his campaign.

Kitzhaber declined to say how much money he hoped to recover from Oracle, but he said he's willing to pay for the portions of the website that do work.

A review commissioned by Kitzhaber placed blame on the state's contract with Oracle, which said the company would be paid based on its time and materials rather than specific content delivered. The review also faulted the state's decision not to hire a system integrator to oversee the project.

Kitzhaber acknowledged the state's failings but said Oracle shares the blame.

"I don't think by any stretch of the imagination Oracle or anyone else could assume that we were paying them to produce a website that didn't work," Kitzhaber said.

Kitzhaber also sent a letter to the inspector general of the Department of Health and Human Services urging the federal agency, which supplied the money that paid Oracle's bills, "to levy the appropriate fines and penalties to hold Oracle accountable.

In 2011, Oracle agreed to pay nearly $200 million to settle charges that it defrauded the U.S. government on a software contract. The Justice Department alleged that Oracle failed to tell the federal government about discounts available to other customers. The allegations initially were raised in a suit against the company under the False Claims Act, which provides financial rewards to private litigants who report alleged fraud against the government.

Kitzhaber urged U.S. Sens. Ron Wyden and Jeff Merkley to also use the authority of their offices to investigate Oracle's culpability. Wyden is chairman of the Senate Finance Committee.

The Associated Press contributed to this report