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A plane flies over software maker Oracle Corp.'s headquarters in Redwood City, Calif.
(Paul Sakuma)
With the state's political establishment still reeling from the resignation of former Gov. John Kitzhaber, software giant Oracle America has launched what appears to be a full court press to force Oregon officials to settle costly pending lawsuits.
Nobody will speak on the record whether the two sides are negotiating to settle the state's fraud and racketeering lawsuit against Oracle over the $300 million Cover Oregon health insurance exchange debacle. But considering a recent mix of lobbying and hardball politics unleashed by Oracle, it would not be surprising.
Settling the suit now would "stop the p.r. bleed" for Oracle, said David Friedman, a Willamette University College of Law professor who has been following the case.
On the technology side, Oracle recently notified Oregon it would no longer process Oregon Health Plan enrollments starting just days from now. The move would block health care for tens of thousands of low-income people. State lawyers are now in court trying to stop that.
On the political-legal front, the company nearly two months ago sent letters to Democratic political consultants and former Kitzhaber aides, warning them to preserve documents and suggesting they could be brought into court to testify or even sued.
Meanwhile, a Congressional ally of Oracle has launched an investigation of the role of Kitzhaber campaign officials in managing the state's exchange debacle. Neither the firm nor Rep. Jason Chaffetz, R-Utah, will comment on political observers' belief the probe was launched at Oracle's request.
"This is Oracle getting Congress to do their bidding," said Duke Shepard, a former Kitzhaber aide. He said the Congressional probe echoes the letter he received from Oracle in early January that in effect let him know he was on the company's legal radar.
Oracle has hired two high-powered, well-connected lobbying firms with deep Oregon ties to work towards a settlement. Gallatin Public Affairs, headed by Dan Lavey, a top former aide to former U. S Sen. Gordon Smith, is active in Salem. The lobbying firm Capitol Counsel, headed by Josh Kardon, a former top aide to U.S. Sen. Ron Wyden, is based in Washington, D.C. Kardon said he is working on the Oregon situation as well as tax and patent-law issues, but declined to say more.
The political team is backed by top litigators, including Jamie Gorelick, a top U.S. Department of Justice official in the Clinton administration.
In addition to aggressively fighting Oregon in three court cases spread between federal court and state court, Oracle has shown it is willing to open up yet another legal front. In a recent court filing the firm suggested it could sue to block legislation to dissolve Cover Oregon, which lawmakers hope would eliminate a major political embarrassment for the state.
Friedman, the law professor, likens Oracle's tactics to a legal war of attrition.
Already, the state has spent about $1.7 million of the $2 million contract with Markowitz, Herbold, the law firm hired by Attorney General Ellen Rosenblum to represent the state.
In taking on Oracle, Oregon went up against one of the largest, most profitable software companies in the world. The Redwood City, Calif., company has 122,000 employees. It earned $10.9 billion in profits in 2014 on total sales of $38.2 billion.
That kind of revenue gives Oracle a deep war chest to wage its legal fights.
"A dollar out of Oracle's pocket is not the same as a dollar out of the state's pocket," Friedman said. "At what point (does Rosenblum) have to go to the Legislature for a special appropriation?"
Rosenblum and Gov. Kate Brown declined to comment on a possible settlement.
Rosenblum, who filed the fraud and racketeering case against Oracle at the request of Kitzhaber last August, would have to sign off on any settlement. She would likely do so with input from Brown.
Brown is close to people with ties to the Oracle case. Her deputy in the Secretary of State's office, Robert Taylor, is married to Anna Richter Taylor, one of at least two advocates at Gallatin Public Affairs working on the Oracle account.
Brown's new general counsel, Benjamin Souede, represented a former top state information technology official, Carolyn Lawson, whose threatened lawsuit accusing the state of forcing her out for political reasons is echoed in Oracle's legal filings.
Souede "is fully screened from all aspects of the Oracle matter," said Brown spokeswoman Kristen Grainger in an email.
If Oracle can wrest a settlement from the state, it would end the production of documents and sworn testimony that could prove revealing about Oracle's conduct.
Though much of Oregon's dirty laundry on the project has come out, Oracle's internal documents and discussions about Cover Oregon so far remain off limits to the public.
"If they think there's something out there that could hurt them by becoming public," Friedman said, "then it would probably make sense to try to end the lawsuit."
Already, state and consultant reports accuse Oracle of shoddy work and poor project management. The state's lawsuit quotes at least one former Oracle employee who said the firm waged a "behind-the-scenes" effort to successfully persuade state officials to forgo hiring an expert technology contractor to oversee Oracle's work.
That decision effectively handed the project over to Oracle. Oregon was the only state in the nation to hire Oracle to build its health exchange, even though the firm was one of the first to market its "fully integrated" and "off the shelf" health exchange solution to states seeking generous federal funding.
Oracle has vociferously defended the quality of its software and programming work, even taking a presentation to staff of the U.S. House Energy and Commerce committee last summer, accusing Oregon of shelving the project for political reasons.
The presentation cites liberally from media accounts and reports disclosing Oregon's mismanagement and poor early decision-making on the project - including the failure to hire a technology contractor to oversee its work.
Of late, Oracle has pointed to media reports that Kitzhaber's campaign advisers played a major role in trying to get the Cover Oregon debacle out of the headlines. The firm claims that Kitzhaber, wanting to appear decisive as he faced re-election, shelved the Oracle project even though the technology worked.
That's the focus of the "litigation hold" letter Shepard said he received from Oracle in early January demanding he preserve potential evidence.
Similar letters reportedly went to Kitzhaber's inner circle and campaign advisers such Patricia McCaig. Records show she worked closely with Clyde Hamstreet, the interim Cover Oregon director selected by Kitzhaber to manage the project. McCaig earlier had been deeply involved in the collapsed effort to build a new interstate bridge.
An article Wednesday in Willamette Week quoting leaked emails indicates Kitzhaber in February 2014 approved McCaig heading a secretive, joint state-campaign committee to engage in "specific, intensive management of the Cover Oregon issues."
It was in February 2014 that officials' statements concerning the Oracle-built technology turned from optimistic to bleak in a span of weeks. Asked about the change in tone, they said that while a soft launch of the website to agents initially seemed promising, more and more bugs popped up.
The weekly's article also asserted that McCaig worked to create the illusion of public process around the decision to dump Oracle. The claim echoes reporting by The Oregonian/OregonLive that she and Cover Oregon secretly worked to "coordinate" public proceedings around the decision in April, but the actual decisions were made secretly weeks earlier and announced to staff before the public vote occurred.
Agents reported that the site worked well for households of two or less. When enrolling families of three or more, the error rate was about 50 percent.
The Kitzhaber campaign's role in the Cover Oregon debacle is also the focus of the probe led by Chaffetz, the congressman who heads the House Oversight and Government reform committee. The committee recently demanded documents from the state that pertain to the campaign's Cover Oregon role.
Chaffetz has carried legislation sought by Oracle in the past and has also received campaign contributions from the firm, including $10,240 in 2013-14.
Perhaps the most pressing concern for Oregon is the fate of its Medicaid program. The state has gone to court for an injunction to block Oracle from ending its work enrolling people into the low-income health program
If Oracle did walk away, state officials would be forced to hire of hundreds of temporary workers to enroll people and process renewals.
The surprise announcement that Oracle would not renew its contract on Medicaid followed months of discussions in which Oracle assured the state it would continue providing services until at least January 2016, state officials said. Oracle maintains it merely was open to the discussion.
-- Nick Budnick and Jeff Manning
nbudnick@oregonian.com jmanning@oregonian.com
503-294-5083 503-294-7606
@nickbudnick @JeffmanningOre