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Dr. Bruce Goldberg, former director of the Oregon Health Authority, is among the current and former state officials whose emails regarding the state's health exchange, were subpoenaed by federal investigators this week.

(The Associated Press)

The federal criminal investigation of Oregon's health insurance exchange took a step into public view Tuesday when the U.S. Attorney's office issued

seeking information from Cover Oregon and the Oregon Health Authority.

While the Federal Bureau of Investigation's interest in the exchange debacle had been previously reported, the legal demands dated May 13 indicate things may have moved beyond a preliminary inquiry to a full-blown investigation.

The investigation, led by federal prosecutors and the FBI, is seeking documents, memos, and emails between the two state entities that oversaw the botched health exchange with U.S. authorities in charge of dispensing federal money for the project.

Oregon has spent $250 million and three years on an ambitious IT project that failed to produce a fully functional exchange. Instead, what was produced was bug-ridden and largely unfinished, documents show.

State officials say they'll cooperate with the federal grand jury subpoenas. Cover Oregon and the Oregon Health Authority issued a joint statement: "The agencies take this request seriously and will cooperate fully with federal officials. We will work collaboratively with the US Attorney's Office to provide any and all information we have and make any and all staff available to assist."

The subpoenas were released in response to Oregon Public Records Law requests by The Oregonian.

Among other things, the FBI seems to be interested in whether state officials misled their federal counterparts about progress on the exchange in order to get more federal funding. The FBI has asked for all communications between the state and the Center for Medicare and Medicaid Services, the so-called "gate reviews," in which federal officials supposedly quizzed state officials about the status of the IT project.

The FBI is also seeking communications with Exeter Systems, another technology company that approached the state saying it had a cheap, off-the-shelf technology that would meet the state's needs.

Documents obtained through Oregon's public-records law have shown that the Legislature's IT oversight analyst, Bob Cummings, felt the state misled federal officials about the status of the project. He related that Exeter felt the same, and that a Cover Oregon demonstration to the feds that was "little more than what" an Exeter executive – formerly with Oracle -- "had built as a 'demo' for Oregon."

The bureau also asked for exchange-related emails from a whole host of current and former state officials, including Carolyn Lawson, former OHA chief information officer, Bruce Goldberg, former director of OHA, Aaron Karjala, former Cover Oregon chief information officer, Rocky King, former Cover Oregon director, and Mike Bonetto, Kitzhaber's chief of staff and formerly one of the governor's lead health care advisors.

Liani Reeves, the governor's general counsel,

to the U.S. Attorney's office that the state would cooperate, as it already is doing with a Congressional

personal data security.

Cover Oregon was already a significant political liability for Gov. Kitzhaber. Confirmation of a federal criminal investigation into the matter likely won't help. In an early May poll, about half of registered voters said Kitzhaber should not be re-elected.

Last fall's PERS reform and Kitzhaber's other achievements have been "completely subsumed by this Cover Oregon stuff," said prominent local pollster Tim Hibbitts.

"The governor sees this investigation as an important step so we can get answers to the questions we and the public have," said Kitzhaber spokeswoman Nkenge Harmon Johnson. "He has no reason to believe any public employee did anything illegal."

In a May 10 interview, Kitzhaber said he had no direct knowledge of the FBI investigation, but said he hoped another federal agency, the Government Accountability Office, would look at a consultant's finding that Cover Oregon had presented rosier risk-status reports to the federal government than existed internally. "Whether that was intentional, criminal or an error, I don't know," he said.

Dwight Holton, a former federal prosecutor, said he could not comment on the case. But speaking generally, he said prosecutors often use standing grand juries, rather than a special grand jury set up for one purpose, to issue subpoenas. Grand juries have broad powers to demand information, and can issue legal demands even if there is scant evidence of a crime. They can be used "to determine whether a crime has been committed or whether a crime has not been committed," he said.

The fact of a grand jury has been used to issue subpoenas is not evidence that a crime has been committed, he added. In fact, the grand jury may not even know a subpoena has been issued in its name. "It's impossible to draw any conclusions" based on a grand jury subpoena, Holton said.

-- Jeff Manning and Nick Budnick