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Oracle billed the state of Oregon for millions of dollars on the Cover Oregon project even after the software giant secretly determined its own poor work had already cost the state millions, a state lawyer said Monday.


A Salem court hearing in the long-running litigation over the state’s $300 million health insurance website debacle featured the first public discussion of newly emerging but still-secret internal documents from Oracle.

Oregon’s outside lawyer, David Markowitz, sought to put the company’s ethics on trial, pointing to a November 2013 email sent to a top Oracle official analyzing problems Markowitz said were “caused by Oracle” on the project.

“As you can see, they’ve even quantified the millions of dollars that would need to be returned to Cover Oregon to compensate,” Markowitz said. “What these exhibits reflect is that by mid-November, Oracle had a very good picture of how bad the system was, how bad their own employees’ performance had been.”

Oracle’s lawyer, Robert Shwarts, stepped up his attacks on a former Oracle manager whose testimony underlies portions of the state’s lawsuit. He sought to discredit the manager’s scathing assessment of the company’s ethics and management of the project.

Monday’s hearing was set to weigh the state’s motion to seek punitive damages from Oracle for malice and dishonesty. Both sides’ arguments amounted to a dry run for the high-stakes trial scheduled to start in six months.

How Marion County Circuit Judge Courtland Geyer rules on the motion could present a turning point in the case, as the bulk of Oregon’s lawsuit rests on claims that Oracle engaged in fraud. Given how the legal bills are mounting, the outcome could influence whether the case is settled before trial.

“In terms of public relations, it would be a big victory for either side if there is a clearcut result from this,” says David Friedman, a Willamette University law professor who’s tracked the case.

On Monday, the lawyers agreed to discuss still-secret documents covered by a confidentiality order only obliquely, without displaying them on a screen.

Markowitz said that after the project failed to launch as planned in October 2013, a team of Oracle experts came to a far bleaker internal assessment than the company previously provided the state.

Markowitz said the company has made misleading clients a habit. “Companywide, this was standard practice: not to tell their customer the reality of what the condition of the project was.”

Shwarts said Oracle had fulfilled its legal obligations under the time-and-materials contract the state had agreed to. He also contended that the state lacked a “scintilla of evidence” that company officials knowingly lied when they depicted the project as on track.

Monday’s new evidence sheds more light on a saga that began in 2014, when the state scrapped what was supposed to be a state-of-the-art health insurance enrollment website for Obamacare, and opted to use the federal government’s version instead.

Documents and the state’s own assessment indicated that Oregon officials had mismanaged the project, among other things allowing shoddy work by Oracle, the main contractor, to go unchallenged.

The state’s lawsuit seeks more than $6 billion, accusing Oracle of repeatedly lying to the state about the quality of its software and programming.

However, the company claims the problems were the state’s fault for not hiring another contractor to oversee Oracle’s work. Not only that, but the company says it eventually solved the website problems, only to have former Gov. John Kitzhaber tank the project to boost his reelection.

Lately, the state has been filing Oracle records in court showing the company’s own experts felt the company’s team in Oregon had done inexcusably shoddy work. One expert said Oracle’s team should be publicly flogged, while a programmer commented in an email that the company had been raping the state of Oregon by charging it for an army of Oracle programmers to address problems with the company’s software.

“What we have is a very telling story of an ongoing practice by a corporate giant to take tens of millions of dollars in a setting of crucial public importance,” Markowitz said Monday.

“I understand that there was a lot of money spent, that this is a mattter of great public interest,” Shwarts said. But he rejected Markowitz’s argument that state officials had believed statements in Oracle’s contract bid package that the company’s software “solution” for Oregon was already 95 percent “integrated” and ready to be assembled. He said the state is behaving unethically in court.

Claims of fraud merely show the state is trying to “bootstrap” a run-of-the-mill contracts case “into something bigger,” Shwarts added.

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