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More than 100 Oracle programmers worked on the Cover Oregon website last fall. The state is suing the firm, accusing it of shoddy work.

(Michael Lloyd/The Oregonian)

The Oregon Department of Justice has filed its long-discussed lawsuit against Oracle America, the company state officials have accused of shoddy work on the Cover Oregon health exchange.

The lawsuit drops some bombshells. It ups the ante in the legal dispute by claiming Oracle participated in "crimes" such as wire fraud and by invoking the state's civil Racketeer Influenced and Corrupt Organizations Act, showing the state intends to prove a pattern of fraudulent enrichment at Oregon's expense.

Perhaps more significantly, the suit also indicates the state has information from at least one ex-Oracle whistleblower that supports the state's case.

was filed in Marion County Circuit Court Friday morning. It accuses the California software giant of fraud, false claims, breach of contract and civil racketeering.

The filing comes two weeks after Oracle filed its own suit against Oregon in federal court, claiming its product worked by February, blasting the state for mismanagement, and demanding $23 million. On Friday, the firm issued a statement calling the state's suit "fictional" and a "desperate attempt to deflect blame from Cover Oregon and the Governor for their failures to manage a complex IT project."

Oracle blames the state for failing to hire a "systems integrator," sort of a specialized technology general contractor to oversee Oracle's work.

The state's lawsuit, however, derides Oracle's suit and also pins the state's decision not to hire a systems integrator on Oracle itself.

The complaint cites information from an unnamed former employee that Oracle engaged in a concerted effort to persuade the state not to hire a systems integrator, or SI. The former employee said the company engaged in an organized "behind-the-scenes effort" calculated to convince the state that hiring an SI would just cause delay. The company's real concern was that the state's hire of an SI is "just going to cause us trouble," the employee said, according to the suit.

The decision not to hire an SI is a significant issue in Oregon's health exchange saga because it meant a windfall for Oracle, making the company the primary contractor. The state initially committed only about $7 million for Oracle software, but the eventual payments to Oracle were more than $130 million.

The state lawsuit's other allegations include:

Oracle America, Inc. "fraudulently induced" the state "to enter into contracts for the purchase of hundreds of millions of dollars of Oracle products and services that failed to perform as promised."

Oracle "then repeatedly breached those 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.

The firm "presented the State and Cover Oregon with some $240,280,008 in false claims under those contracts."

"Oracle's conduct amounts to a pattern of racketeering activity that has cost the State and Cover Oregon hundreds of millions of dollars."

Oracle engaged in a "pattern of racketeering activity by committing or attempting to commit the crimes of unsworn falsification ... and fraudulently obtaining a signature."

Other "crimes" alleged include obtaining execution of documents by deception and wire fraud.

The suit targets six Oracle employees personally, including company President and Chief Financial Officer Safra Catz. It also names Mythics, Inc., a Virginia-based company that was used as a contracting intermediary for Oracle's products.

A press release issued by Attorney General Ellen Rosenblum says the state is pursuing penalties as well as the state's money back.

"Today's lawsuit clearly explains how egregiously Oracle has disserved Oregonians and our state agencies," said Rosenblum's prepared statement. "Over the course of our investigation, it became abundantly clear that Oracle repeatedly lied and defrauded the state."

Later on Friday, the state filed a motion to dismiss Oracle's federal lawsuit, accusing it of "forum shopping" between courts to give it an edge in the dispute.

The suit and the response to Oracle were both prepared on behalf of DOJ by the Portland firm Markowitz, Herbold, Glade & Mehlhaf, which has been deputized as a special assistant attorney general for the case. The state has issued the firm a $2-million contract.

--Nick Budnick