Oracle settles Oregon fraud case over website debacle for $100 million
The state of Oregon and Oracle, the vendor on the $300 million Cover Oregon website debacle, have settled their wide-ranging legal dispute for more than $100 million in goods, services and cash.
Oracle will supply funds, software and services to the state to settle a case in which Oregon had accused the Redwood City, California, software giant of fraud and racketeering on the state's one-stop-shopping health insurance website project that never worked as planned.
The state had been asking for roughly $6 billion.
Todays settlement agreement ends years of turmoil and taxpayer expense related to a troubled health care exchange program I dissolved in March 2015, Gov. Kate Brown said in a statement.
The agreement, announced early Thursday, Sept. 15, by Brown at OMSI, includes only $35 million in actual cash. Of that, $25 million will go to legal costs. The other $10 million will go toward science, technology, engineering and math education in public schools, to be branded as "Oracle STEM Education Grants."
The state's $105 million valuation of the settlement also includes $60 million in free customer service support for yet-to-be-obtained Oracle software.
State officials were expected to notify the federal government of the settlement later Thursday morning, Brown said. Brown declined to answer a question about whether the state will be required to give any of the settlement money to the federal government.
We received a very limited amount of cash as you will see; the cash is $35 million, Brown responded. These settlements are very challenging to resolve, and all of the parties had to do some give and take in order to resolve the matter.
The federal government contributed $305 million for Cover Oregon. But federal officials may find it hard to recoup any part of the settlement's ostensible value. Not a penny of the amount will go to repay the state for the $240 million it paid Oracle in connection with the project, or reimburse the state for any of the related damages cited in the state's lawsuit against Oracle.
A spokeswoman for Brown, Kristen Grainger, said the settlement was "carefully" and "creatively" constructed to let Oregon keep as much of it as possible, hopefully the whole amount.
"We are hopeful that (the federal government) will see that the needs of consumers are met," she said.
Sharing the blame
Under the agreement, neither side admits liability or wrongdoing. It also calls for a close working relationship between the two sides.
Besides the $35 million in cash and $60 million in customer support, the settlement also includes a six-year licensing agreement that would allow the state to get free software to upgrade some of its information technology systems.
The expansion of the state's relationship with Oracle represents a major departure from state officials' past representations that the company provided flawed software, did shoddy work and engaged in unethical, even criminal business practices. In fact, the state's lawsuit had asked a judge to ban Oracle from ever doing business with the state again.
Asked whether the state could entrust its IT systems to Oracle after the Cover Oregon failure, Brown said she was confident in the companys expertise around business enterprise software.
The settlement is an incredible opportunity for us to take advantage of that expertise, Brown said. Oregon had a bad experience with Oracle in terms of developing the Cover Oregon project.
But the state had no issue with the software services that Oracle provided the state during the past several years, she said.
Oregon House Minority Leader Mike McLane, R-Powell Butte, said Thursday that the settlement "marks the end of one of the most embarrassing chapters in Oregons history."
"While Oracle clearly made mistakes, there is no escaping the fact that the state, too, shares blame for the failure of Cover Oregon," McLane said. "From the very beginning, the project was mismanaged and wracked by the failures of our bureaucracy.
"Despite the states obvious culpability, Attorney General Rosenblum put tens of millions of taxpayer dollars on the line for a legal strategy that was motivated by politics and never stood a realistic chance of recovering everything that was lost."
Rosenblum responded that the settlement wouldn't have happened had she not pursued the litigation.
"We now intend to work together again, and I call upon the good representative to let go of the acrimony and political bashing and join Oregon and Oracle in making positive changes in our IT systems going forward," the attorney general said.
It appears that Rosenblum and her attorneys had felt the $6 billion lawsuit was worth much more than Oregon eventually settled for. Contract ledgers show the state has paid more than $15 million to outside lawyers in connection with the case, which does not include other state costs.
Her side had obtained internal Oracle emails that would not look good in court, or in the national media. One company employee said that the company had been "raping" the state. An expert Oracle troubleshooter said the company's work in Oregon was so poor that the employees responsible should be publicly "flogged."
The state's lawyers in court said they'd obtained other documents showing that Oracle knew its software products could not provide the services it had promised while trying to win the Oregon contract.
Grainger, the Brown spokeswoman, said election considerations or other politics did not play a role in the desire to settle the case.
David Friedman, a Willamette University College of Law professor who has been sympathetic to Oracle's arguments in the case, said "I really do think this is a win-win. The state is getting a substantial amount of services and value from Oracle ... and Oracle can say 'Hey look, we're not racketeers, we're not fraudsters.'"
Tough talk is normal in a case like this, according to Friedman. But now that's over.
"They're skipping off holding hands now through the wildflowers," he said, "essentially back in business with one another."