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Oregon moves toward lawsuit over health exchange

Tuesday - 6/17/2014, 3:40am  ET

JONATHAN J. COOPER
Associated Press

SALEM, Ore. (AP) -- Oregon issued legal demands for documents that could become evidence in a possible lawsuit against the developer of the state's failed health insurance website, a solid indication it's preparing for a civil case against technology giant Oracle Corp.

Officials in the governor's office and the state Department of Justice told The Associated Press that record requests known as civil investigative demands were issued, but they declined to say how many were issued or whom they target. They are the first such demands issued in preparation for potential litigation against Oracle, said Kristina Edmunson, a department spokeswoman.

The move on Monday came just weeks after the state more than quadrupled its contract with a private law firm handling the dispute with the second-largest software corporation in the world. Documents obtained by the AP show the state boosted the firm's contract from $550,000 to more than $2.5 million.

Gov. John Kitzhaber blames Oracle for bungling the software for Cover Oregon, the state-run site that was supposed to allow residents to sign up for insurance under the federal health law.

The state paid Oracle $134 million in federal funds to build the online enrollment system. The website never fully launched, requiring staff to process part of each application by hand in a slow and costly maneuver. Altogether, about $250 million in federal funds has been spent on Oregon's exchange, including technology development, salaries, advertising and rent.

An Oracle spokeswoman declined to comment. In past public statements, the company has defended its work, saying the state did not deliver requirements in a timely manner and failed to staff the project with skilled personnel. The company has said Kitzhaber "wants to shift blame from where it belongs."

The state decided to ditch the Oracle-built website and use the federally run health exchange.

The civil investigative demands issued Monday are similar to subpoenas and are used by the government to seek information that could be used in a lawsuit. They can help lawyers decide whether to sue over unlawful business practices or false claims.

It's unknown how much a lawsuit would cost, but the state may be able to recover legal fees if it wins, said Nkenge Harmon Johnson, a Kitzhaber spokeswoman.

Portland law firm Markowitz Herbold Glade & Mehlhaf PC has been paid $352,000 so far to prepare for a potential lawsuit, and their contract now allows them to bill the state up to $2.5 million.

In addition, the state has racked up legal bills to defend itself in multiple investigations over Cover Oregon's failures, according to documents obtained by the AP.

The state has retained two Washington, D.C., lawyers to help with an investigation by a U.S. House committee. A Portland criminal defense attorney also was hired in response to an investigation by the FBI and U.S. Attorney's Office, according to the documents, which include contracts and billing summaries obtained under Oregon's public records law.

To help with the investigation by the Republican-controlled House Committee on Oversight and Government Reform, the state hired Elliot Berke, who has been a lawyer for former House GOP leaders, and his law partner, Democratic attorney William Farah. Their firm was paid $17,000 last month before they founded their own company, which has a contract worth up to $100,000.

The lawyers have helped facilitate the release of thousands of documents the committee requested March 25.

The state also turned to Portland attorney Robert Weaver, a former federal prosecutor who has defended a number of high-profile criminal defendants, including figure skater Tonya Harding.

Weaver is representing the state and its current and former employees in a federal criminal investigation. The U.S. Attorney's Office has issued subpoenas to state agencies seeking, among other things, communications between 10 officials involved in developing and overseeing the Cover Oregon website.


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