In the aftermath of what was likely the most spectacular failure among state-run Affordable Care Act health exchange site launches, the state of Oregon has filed a lawsuit against Oracle America Inc. over the total failure of the Cover Oregon exchange. “Oracle’s conduct amounts to a pattern of racketeering activity that has cost the State and Cover Oregon hundreds of millions of dollars,” Oregon Attorney General Ellen Rosenblum wrote in a civil complaint filed August 22. The lawsuit seeks over $5.5 billion in damages from Oracle, plus legal fees.

The complaint comes after Oracle filed its own lawsuit against the state’s health exchange for failure to pay for services rendered in early August. Oracle’s attorneys claimed that Oregon Governor John Kitzhaber had defamed the company in a “smear campaign” while failing to take responsibility for the failure of state management of the project and not paying Oracle for additional work done.

The 126-page complaint, filed by Rosenblum in Oregon’s Marion County Circuit Court on August 22, claims that Oracle pushed the state to not hire a systems integrator for the project, giving the company total control over the development of the site and allowing company executives to conceal problems with the software. “According to a former Oracle employee, Oracle advanced a ‘planned’ behind-the-scenes effort' to convince the State 'that a Systems Integrator would just cause delay,'” Rosenblum wrote in the complaint. “The former employee explained that ‘the message was 'we’ve got to make sure that [the State] doesn’t bring [a Systems Integrator] in because it’s just going to cause us trouble.’”

The lobbying resulted in Oregon officials giving Oracle the system integrator role, which allowed the company to conceal problems with software and essentially bill for fixes to the software that should have been covered under the license agreements for the software itself, the attorney general asserted. In the filing, she said, “Oracle repeatedly breached contracts by failing to deliver on its obligations, overcharging for poorly trained Oracle personnel to provide incompetent work, hiding from the State the true extent of Oracle’s shoddy performance, continuing to promise what it could not deliver, and willfully refusing to honor its warranty to fix its errors without charge.”

As a result, Rosenblum claimed, “Over the last three years, Oracle has presented the State and Cover Oregon with some $240,280,008 in false claims under those contracts.”

Oracle, for its part, claims that the state is using the company as a scapegoat for its own gross mismanagement of the project. “Cover Oregon and public officials could have done two things in the face of those press reports: (a) own up to the management and technical challenges they had encountered and commit to a plan for resolving them; or (b) blame someone else,” Oracle’s attorneys wrote in their August 5 filing. “They chose the latter, and they fixed their sights on Oracle. While flogging Oracle publicly, Cover Oregon continued privately to ask for Oracle’s help.”

As a result of the failure of the Cover Oregon site, the state has abandoned its own planned exchange and has shifted to using the federal site. It’s likely that much of any award Oregon’s suit would be returned to the Federal government, which provided a grant for the site’s development under the Affordable Care Act.