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Oregon countersues Oracle over failure of Cover Oregon

The State of Oregon is now countersuing Oracle for fraud, false claims, breach of contract and civil racketeering. Oracle was the primary contractor for state healthcare exchange project Cover Oregon, which did not perform as advertised.

Oregon filed a lawsuit against Oracle on Aug. 21, seeking more than $200 million in damages. Oregon is accusing Oracle of fraud, making false claims, breach of contract and civil racketeering for the company's role in helping the state of Oregon to build Cover Oregon, a state healthcare exchange.

Oregon's lawsuit follows close on the heels of a lawsuit filed by Oracle against Oregon on Aug. 8 alleging breach of contract and continued use of Oracle products without paying Oracle $23 million for services rendered.

According to the state of Oregon's lawsuit, Oracle "fraudulently induced the State of Oregon and the Oracle Health Exchange Corporation to enter into contracts for the purchase of hundreds of millions of dollars of Oracle products and services that failed to perform as promised."

Oregon hired Oracle as the largest technology contractor on its health insurance enrollment website, Cover Oregon. The website didn't launch on time and the state had to hire hundreds of workers to process paperwork by hand. Now, Oracle and Oregon are playing the blame game.

Oracle's claim is that it has a long and proven track record of successfully setting up healthcare insurance and so none of this is Oracle's fault. It is just being used to deflect bad press. The introduction to Oracle's lawsuit states: "While flogging Oracle publically, Cover Oregon continued to ask for Oracle's help." It continues to explain that Oracle gave that help for as long as it could, but Oregon's lack of payment eventually forced them to sue instead. Oregon originally committed to paying Oracle $7 million, but payments in the end came out to over $130 million.

One of the most hotly debated aspects of the litigation is the curious case of the systems integrator (SI). The role of the SI is to be a specialized technology contractor overseeing the work of another company, in this case Oracle. Oregon did not hire an SI and Oracle claims that this failure led to the problems it experienced setting up the site, making it no fault of Oracle's. Oregon is turning the statement around, alleging that Oracle worked behind-the-scenes to convince Oregon officials not to hire an SI and thus make Oracle the primary contractor.

On Aug. 21, immediately after Oregon filed its suit, Oracle returned with a prepared statement claiming that Oregon's suit was "a fictional account of the Oregon Healthcare Project."

The Department of Justice is currently reviewing the claims made by the State of Oregon and no court date has been set.

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Ouch. This could leave a mark. Couldn't happen to a nicer company.
Seems like a lose-lose situation to me, as most finger-pointing episodes are.