Kitzhaber Seeks Legal Action in Oracle Website Failure

Oregon Governor John Kitzhaber asked the state attorney general to take legal action against Oracle Corp. (ORCL), the primary developer responsible for setting up the state’s failed Obamacare health-insurance exchange website.

Kitzhaber told a legislative committee yesterday he’s seeking to recoup the state’s payments to Oracle plus damages, citing bugs in the system and missed deadlines. He’s also asking the federal government and the state’s U.S. senators to explore the breakdown.

“The time has come to hold Oracle accountable for failing to deliver technology that worked, in the timelines that they agreed to,” said Kitzhaber, a 67-year-old Democrat.

Kitzhaber, who has come under political attack on the issue as he seeks a fourth term, has been trading blame with Oracle over the failure to create a website Oregonians could use to enroll in health coverage under President Barack Obama’s Patient Protection and Affordable Care Act.

“Contrary to the story the state is promoting, Oracle has never led the Oregon health exchange project,” Redwood City, California-based Oracle, the biggest maker of database software, said in a statement.

‘Badly Mismanaged’

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,” according to Oracle’s statement.

Technical flaws in the Cover Oregon website, the portal to a $305 million state-run insurance exchange, caused thousands of consumers to file paper applications until the state gave up last month and directed enrollees to the federal website.

Oracle executives in February “made it clear to me that they take no responsibility for the failure to deliver a working website,” Kitzhaber said in yesterday’s letter to Oregon Attorney General Ellen Rosenblum.

Rosenblum, in a response, said her office is investigating.

“I share your determination to recover every dollar to which Oregon is entitled,” Rosenblum said.

Kitzhaber also wrote yesterday to Daniel Levinson, the inspector general of the U.S. Department of Health and Human Services, asking that he “levy the appropriate fines and penalties to hold Oracle accountable.”

Kitzhaber, an emergency room doctor, wrote to Oregon senators Ron Wyden and Jeff Merkley, both Democrats, for help in recouping the taxpayer dollars Oregon paid to Oracle.

‘Clearer Picture’

“I have acknowledged that oversight was a problem,” Kitzhaber said. “Even better oversight would only have given us an earlier and clearer picture of the poor performance of Oracle.”

The issue has become the main criticism of his tenure in the governor’s race.

“We understand the political nature of the announcement just made and that the governor wants to shift blame from where it belongs,” the company said in its statement. “We look forward to an investigation that we are confident will completely exonerate Oracle.”

A poll released this month found 49 percent of registered voters believe it’s time to replace Kitzhaber.

Obama’s health care program aims to expand insurance coverage to most of the 48 million U.S. residents without it partly by selling them private policies through new government-run marketplaces called exchanges.

Tax Penalty

The state exchanges allow residents to use a website or telephone service to input information, including their income, and select from a menu of private health plans. Those who didn’t enroll by a March 31 deadline may face a tax penalty.

Federal prosecutors in Portland are investigating Cover Oregon, according to a May 13 letter they sent to the Oregon Health Authority.

A federal grand jury issued a subpoena to the agency for records about what its applications to Medicaid for funding said about whether the website was working, communications with Medicaid officials when the federal agency was conducting funding review and reports “about representations that had been made” to Medicaid about the status or functionality of the health insurance exchange website.

All purchase orders and invoices for Oracle and the company’s work statements were also ordered to be turned over, according to the subpoena.

Oregon Health Authority officials were ordered to appear before a grand jury to testify on June 10 and provide the records by that date, according to the subpoena. The agency and Cover Oregon said in a statement this month that they will cooperate with federal prosecutors.

“We will work collaboratively with the U.S. Attorney’s office to provide any and all information we have and make any and all staff available to assist,” according to the statement.

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Jeffrey Taylor, Pete Young

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