Oregon sues Oracle over troubled health insurance website

Oracle's actions amount to a 'pattern of racketeering,' the state alleges

Oregon has filed a long-expected lawsuit against Oracle over its role developing the state's troubled health insurance exchange website, alleging the vendor fraudulently induced Oregon to pay hundreds of millions of dollars for software and services that didn't work as promised.

Oracle's actions "amount to a pattern of racketeering," according to the 126-page complaint filed Friday by Attorney General Ellen Rosenblum in a state circuit court.

First, Oracle lied about its capabilities, saying its software could meet Oregon's needs "out-of-the-box," the complaint states.

After a deal was struck, Oracle committed breach of contract by "overcharging for poorly trained Oracle personnel to provide incompetent work," hiding its shortcomings from Oregon, and refusing to honor a warranty calling for it to fix errors at no charge, the complaint alleges.

In a statement Friday, Oracle called the suit "a fictional account" and said it expects to prevail in its own lawsuit against Oregon, which was filed two weeks ago. Oracle has said state officials are running a "smear campaign" and are attempting to cover up their own failings.

A key point of contention in the case is Oregon's decision to act as its own systems integrator on the project, using Oracle staffers on a time-and-materials basis.

"That decision was akin to an individual with no construction experience undertaking to manage the processes of designing and building a massive multi-use downtown skyscraper without an architect or general contractor," Oracle said in its complaint.

But the state's lawsuit tells a different story, alleging that Oracle was "dead set" against Oregon hiring an independent systems integrator and conducted a "behind-the-scene scheme" to make sure it didn't happen.

Oracle recommended that Oregon hire an internal consulting service to play the same role and in effect became the systems integrator, thereby collecting millions in extra payments, the suit states.

"The cost of Oracle's lies and appalling work is extraordinary," amounting to more than US$240 million in fees, it adds.

Cover Oregon, as the site is known, went live on Oct. 1 and immediately experienced serious technical issues that were never fully resolved. The state has since decided to transfer the exchange over to the federal Healthcare.gov site, which also had a bumpy go-live but was ultimately stabilized.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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Chris Kanaracus

IDG News Service
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