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Oracle is suing the state of Oregon, claiming advisors on Gov. John Kitzhaber's 2014 reelection campaign intentionally interfered with its work on the Cover Oregon health exchange.
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26 Page 1- Complaint
THE CIRCUIT COURT OF THE STATE OF OREGON
FOR THE COUNTY OF MULTNOMAH
ORACLE AMERICA, INC., a Delaware Corporation,
Plaintiff
v.
KEVIN LOOPER, PATRICIA MCCAIG, SCOTT NELSON, TIM RAPHAEL, and MARK WIENER, as individuals,
Defendants.
No. ________________________
COMPLAINT
(Intentional Interference with Economic Relations)
(Not Subject to Mandatory Arbitration: Prayer in Excess of $51,000)
Fee Authority: ORS 21.160(1)(e)
DEMAND FOR JURY TRIAL
INTRODUCTION
1.
Plaintiff Oracle America, Inc. (“Oracle”) brings this Complaint against Defendants Kevin
Looper, Patricia McCaig, Scott Nelson, Tim Raphael, and Mark Wiener, each of whom served as
an advisor to the 2014 reelection campaign of former Oregon Governor John Kitzhaber
(“Governor Kitzhaber”), for intentional interference with Oracle’s economic relationship with
the Oregon Health Insurance Exchange Corporation, d/b/a “Cover Oregon.”
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26Page 2- Complaint
2.
Governor Kitzhaber made it a centerpiece of his Administration to undertake an
ambitious project to modernize Oregon’s system for delivering health and human services, while
simultaneously building a Health Insurance Exchange (“HIX” or the “Oregon HIX”) for Oregon
in accordance with the Patient Protection and Affordable Care Act (“ACA”). The Kitzhaber
Administration planned to build a “no wrong door” approach, where Oregonians who wanted
health insurance would be automatically referred to the Oregon Health Plan, Oregon’s Medicaid
program, or to the private insurance market, depending on eligibility, and where Oregonians who
signed up for food stamps or Temporary Assistance for Needy Families could “fast track” their
enrollment in the Oregon Health Plan. This plan was new and innovative, and Oregon was
awarded more than $48 million in Early Innovator funding from the Center for Medicaid
Services to build this program. Healthcare and healthcare reform were signature issues for
Governor Kitzhaber. His reputation, both within Oregon and nationally, was built on this issue.
3.
The responsibility to develop and administer the Oregon HIX ultimately fell on Cover
Oregon. Cover Oregon is an independent public corporation established by the Oregon
legislature for the purpose of administering a HIX “in the public interest for the benefit of the
people and businesses that obtain health insurance coverage for themselves, their families and
their employees through the exchange” and “in accordance with federal law to make qualified
health plans available to individuals and groups throughout this state.” Or. Rev. Stat. §§
741.001(2)(b) & 741.002(1)(a). Cover Oregon was designed by statute to be independent from
state government. Cover Oregon is managed by an independent Board of Directors—not by the
Office of the Governor or the Oregon Health Authority (“OHA”), the agency of the State of
Oregon responsible for managing most of the State’s health care programs—and it reports to the
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26Page 3- Complaint
legislature. The Governor’s only roles in relation to Cover Oregon are (a) to appoint seven
members of its board of directors (subject to State Senate confirmation); and (b) to remove them,
after notice and public hearing, only for incompetence, neglect of duty, or malfeasance in office.
4.
Cover Oregon hired Oracle—among many others—to help build Oregon’s health
insurance exchange. On or about March 14, 2013, Cover Oregon executed a time-and-materials
contract with Oracle, under which Oracle was to “assist” Cover Oregon in its implementation of
the Oregon HIX. In addition, through a series of other written agreements, Cover Oregon
acquired from Oracle software licenses and hardware, and contracted for Oracle’s services to run
and maintain the technology supporting the exchange. During the development stage, Cover
Oregon chose not to hire a systems integrator to manage the development of the HIX and,
instead, assumed that responsibility itself. The project was too ambitious and too complex for
Governor Kitzhaber's hand-picked administrators to lead or manage. Under Cover Oregon’s
supervision, development of the HIX experienced delays and, ultimately, was not ready for a full
launch in October 2013, the original start of the open enrollment period set by the ACA.
5.
At Cover Oregon’s insistence—even as the Governor was blaming Oracle for the HIX’s
failure to meet the October 2013 deadline—Oracle continued to assist with the development of
the HIX after October 1, 2013. With substantial support from Oracle, Cover Oregon was able to
launch critical parts of the technology supporting the HIX in late 2013. Cover Oregon was able
to enroll more than 430,000 Oregonians in health insurance or Medicaid in the first year of
enrollment thanks to Oracle’s software and consulting services. By late February, 2014, Oracle
had created a functional health insurance exchange web portal which would permit consumers to
shop for and purchase insurance online, and Oracle so informed Cover Oregon.
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26Page 4- Complaint
6.
The initial “failure” of the Oregon HIX, including the failure to launch a publicly-facing
website by October 2013 when open enrollment began under the ACA, was a major
embarrassment for Governor Kitzhaber and Defendants, his campaign advisers, who were in the
middle of a reelection campaign. Governor Kitzhaber was the subject of extensive and ongoing
negative press reports holding him responsible for problems with the projects. Faced with the
prospect of losing the election over the Cover Oregon debacle, on information and belief,
Defendants decided on a political strategy of falsely and publicly blaming Oracle to deflect
blame from Governor Kitzhaber and his Administration. On information and belief, Defendants
orchestrated an effort to induce Cover Oregon, an independent public corporation, to transition
Oregon to the federal exchange and foreclose any possibility that Oregon would operate its own
exchange in the future in order to help Governor Kitzhaber in public opinion polls and bring an
end to public discussion regarding Cover Oregon’s failures.
7.
As part of that strategy, on information and belief, Defendants undertook a concerted
effort to use the access and influence that Governor Kitzhaber enjoyed to insert themselves
surreptitiously and improperly into the non-public, internal decision-making of the independent
public corporation Cover Oregon. On information and belief, Defendants failed to disclose to
Cover Oregon officials that they were paid campaign operatives acting for political purposes on
behalf of the Governor’s reelection campaign rather than policy advisors who would act in a
manner consistent with Cover Oregon’s objectives. As one former aide to Governor Kitzhaber
wrote, she had “voiced concerns about … the overlap of campaign and state advisers[] and the
ways they interact with state business,” but her “concern was seen as disloyalty” and she “was
viewed as an outsider who did not understand the way that they did business.” On information
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26Page 5- Complaint
and belief, Defendants used personal pressure and their influence (which derived from their
relationship with the Governor and the Governor’s position of trust as Chief Executive of the
State and a public servant to the people of Oregon) to direct and manipulate the decision-making
at Cover Oregon as part of an effort to publicly and falsely deflect blame onto Oracle and ensure
that Cover Oregon would decide to discard the Oracle technology, break ties with Oracle, and
abandon its efforts to build or operate a HIX.
8.
On information and belief, Defendants improperly influenced the decision-making at
Cover Oregon to preclude a fair vetting of the technology underlying the Oregon HIX, to cause
Cover Oregon to end its relationship with Oracle and end all efforts to create or operate its own
exchange, to cause Cover Oregon officials to falsely and publicly blame Oracle, to cause Cover
Oregon and the State of Oregon to sue Oracle, and to disrupt and undermine Oracle’s current and
prospective business relationship with Cover Oregon. Through these actions, Defendants
attempted to and did induce Cover Oregon to serve the Kitzhaber campaign’s political and self-
interested goal of winning re-election, rather than carrying out Cover Oregon’s statutory duties
and obligation to take actions for the benefit of the citizens of Oregon. Through these actions,
Defendants disrupted and undermined Oracle’s business relationship with Cover Oregon, as well
as Oracle’s reasonable expectations of a continuing economic relationship with Cover Oregon.
9.
Beginning in at least January 2014, on information and belief, Defendants—none of
whom worked for or had any official duties with Cover Oregon—worked secretly behind the
scenes to interfere with and ultimately direct important decision-making at the independent,
public corporation Cover Oregon to ensure that it decided to sever its relationship with Oracle
and abandon the Oregon HIX. For example, Defendant Patricia McCaig, who was one of the
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26Page 6- Complaint
Governor’s closest advisors and has admitted that she barely knew anything about Oregon’s
HIX, used her relationship with the Governor to take over decision-making at Cover Oregon and
hijack a workgroup convened “to advise on the best options to move forward,” including
whether to continue using the Oregon HIX or switch to an alternative, such as the federal
exchange. In April 2014, McCaig presented a memorandum to Governor Kitzhaber laying out
the process by which she would “stag[e] the decision” to abandon the Oregon HIX. McCaig’s
memorandum, written well before Cover Oregon’s Board of Directors made its decision or even
considered the workgroup’s recommendations, stated that “[r]egardless, the Cover Oregon Board
would hear and accept the federal exchange recommendation.” Days earlier, McCaig insisted
that she “run” a key meeting of campaign staff and top officials in the Governor’s office
regarding the content of the workgroup’s recommendations and the “reporting authority [and]
messaging” of Cover Oregon’s Interim Executive Director, Clyde Hamstreet. Tellingly, the
workgroup had initially decided to recommend staying with the state-based HIX (which relied on
Oracle’s technology), presumably because they believed that this was in the best interests of the
people of the State of Oregon. After this closed-door meeting with the Governor’s campaign
staff, the workgroup changed its recommendation and advocated, instead, for abandoning the
Oregon HIX and transitioning to the federal exchange. Similarly, in April 2014, shortly after
Clyde Hamstreet, the interim executive director of Cover Oregon, had publicly affirmed the
utility of the Oregon HIX and cautioned against “throw[ing] something away that has value,”
McCaig met with Hamstreet. Four days later, Hamstreet’s top aides at Cover Oregon announced
that that Cover Oregon was likely to abandon the exchange, with no explanation given for the
sudden change in position.
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26Page 7- Complaint
10.
On information and belief, Defendants’ interference caused Cover Oregon to “throw
away something that has value” to the citizens of Oregon in order to further their own political
objectives of ending public discussion of Oregon’s HIX in order to win re-election. Defendants’
interference also caused substantial injury to Oracle in the form of unwarranted damage to
Oracle’s business reputation. Defendants’ wrongful conduct further harmed Oracle because it
caused Cover Oregon to refuse to pay for services Oracle rendered at Cover Oregon’s insistence;
prevented Oracle from obtaining the economic value Oracle reasonably expected to earn through
prospective work necessary to support the Oregon HIX; caused Cover Oregon to abandon the
customer-facing website (which Oracle had substantially completed by February 2014 and for
which Oracle would have earned credit in the market); inhibited Oracle’s ability to compete for
and secure work with the State of Oregon in the future; caused Cover Oregon and the State of
Oregon to initiate legal proceedings against Oracle; and maliciously, falsely and publicly blamed
Oracle for the failed October 2013 launch of the HIX.
PARTIES
11.
Plaintiff Oracle America, Inc. (“Oracle”) is a subsidiary of Oracle Corporation and is a
Delaware corporation whose principal place of business is Redwood City, California.
12.
During the period in question, Patricia McCaig worked as an advisor to the Kitzhaber for
Governor campaign. On information and belief, McCaig is a resident of Multnomah County.
13.
During the period in question, Tim Raphael worked as an advisor to the Kitzhaber for
Governor campaign. On information and belief, Raphael is a resident of Multnomah County.
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14.
During the period in question, Scott Nelson worked as an advisor to the Kitzhaber for
Governor campaign. On information and belief, Nelson is a resident of Multnomah County.
15.
During the period in question, Kevin Looper worked as an advisor to the Kitzhaber for
Governor campaign. On information and belief, Looper is a resident of Multnomah County.
16.
During the period in question, Mark Wiener worked as an advisor to the Kitzhaber for
Governor campaign. On information and belief, Wiener is a resident of Multnomah County.
JURISDICTION AND VENUE
17.
Subject matter jurisdiction is conferred on this Court by O.R.S. § 14.030, and under
§ 14.030, this Court has jurisdiction over the matter because Oregon is where the cause of action
arose.
18.
Venue in Multnomah County is proper pursuant to O.R.S. § 14.080(1) because
defendants reside in Multnomah County.
BACKGROUND FACTS
19.
Governor Kitzhaber is a medical doctor by training who achieved significant national
attention through his advocacy for comprehensive healthcare reform. Following passage of the
ACA, Governor Kitzhaber made it a centerpiece of his Administration to make Oregon a leader
in providing new ways to deliver affordable health care.
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26Page 9- Complaint
20.
Governor Kitzhaber vigorously advocated for what he later admitted was an “unrealistic
project” to modernize Oregon’s internet-based health and human services technology system,
including Medicaid enrollment (the “Modernization Project”) while simultaneously building a
state-based HIX. When the ACA was enacted in March 2010, Oregon chose to develop its own
state-based HIX, instead of choosing to use the federal exchange. Rather than focus exclusively
on developing a well-functioning HIX, Oregon took on the monumental task of attempting to
build a HIX and integrate it with the larger, already ambitious, Modernization Project at the same
time. The project was too big and too complex for Governor Kitzhaber’s hand-picked
administrators to lead or manage, however, and the HIX customer-facing website failed to
launch on time. Moreover, Oracle is informed and believes that while the OHA-led Medicaid
project, using Oracle’s software, was ready to be launched well before October 2013, the
Governor’s chosen administrators at Cover Oregon refused to let that launch take place before
the HIX public portal was ready. It would not have served the Governor’s narrative of blaming
Oracle to allow the public to see Oracle’s fully-functional software work.
21.
The failure of Cover Oregon to deliver to the public what Governor Kitzhaber had
promised became the subject of national headlines at a time when the governor was seeking
reelection. Healthcare was Governor Kitzhaber’s signature issue, on which he had built his
reputation. When Cover Oregon failed to launch a HIX on time, mismanagement was among the
very few plausible explanations. Both the press and Governor Kitzhaber’s opponent in the 2014
election, Dennis Richardson, sought to tie Governor Kitzhaber to the problems with Cover
Oregon. For example, one editorial noted that the problems with Cover Oregon had caused
many of Governor Kitzhaber’s “constituents to question whether a competent adult [wa]s really
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26Page 10- Complaint
in charge” and opined that “Kitzhaber’s reputation collapsed along with Cover Oregon.”
Similarly, Richardson stated that Governor “Kitzhaber had a responsibility to be accountable to
Oregonians” and that, “[i]nstead of taking ownership over the failed project, [the Governor] is
merely attempting to distract [Oregonians] from his chief role in the Cover Oregon disaster.”
Richardson also noted that Governor Kitzhaber was “so desperate to get out of the Cover Oregon
hot seat” that he would “say and do anything to draw attention away from himself.”
22.
Widespread public commentary and public opinion polling placed the blame on the
Governor, Cover Oregon, and the Oregon Health Authority for their inability to lead or manage
such a complex information technology (“IT”) project. Because the negative public discourse
threatened his reelection prospects, the Governor looked for ways to place the blame for that
“failure” elsewhere and to end the public discussion of these issues. On information and belief,
Governor Kitzhaber turned to Defendants, his campaign staff, to lead that effort.
23.
On information and belief, Defendants settled on a strategy that included preventing
Cover Oregon from conducting an objective, fair, and thorough evaluation of the Oregon HIX
technology, with the intent to induce Cover Oregon to abandon the Oregon HIX technology
altogether. On information and belief, Defendants also intended to cause Cover Oregon to
falsely and publicly blame Oracle for any failures of the HIX, in order to deflect attention from
Governor Kitzhaber and his hand-picked administrators during an election campaign. Because
Cover Oregon had engaged Oracle to assist it in building the HIX, the out-of-state company
provided a convenient target for Defendants’ strategy.
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24.
In keeping with Defendants’ reelection campaign messaging, Governor Kitzhaber openly
and falsely faulted Oracle for the failure to launch a public-facing website for healthcare
enrollment. Even as Governor Kitzhaber leveled those false accusations, however, Cover
Oregon continued to insist that Oracle complete the work necessary to ready the HIX for a full
launch. But when Oracle accomplished that objective, Cover Oregon still refused to launch the
consumer-facing HIX portal, and never publicly acknowledged the existence of that consumer-
facing portal, because, on information and belief, it would not have served Defendants’ narrative
to do that. Instead, in April 2014, on information and belief, to deflect attention from the
Governor’s significant political embarrassment, and to reinforce the storyline that Governor
Kitzhaber had been propagating for months, Defendants improperly and surreptitiously hijacked
Cover Oregon’s non-public, internal deliberations. Defendants took control of or improperly
influenced important decision-making at Cover Oregon in order to ensure that Cover Oregon
acted in furtherance of Governor Kitzhaber’s reelection strategy, rather than in the interests of
Oregon citizens. As a result, when it decided to abandon the Oregon HIX, Cover Oregon did so
without ever fairly evaluating the technology at hand, or Oracle’s capability to continue to
support it; or soliciting input from those most knowledgeable about the true facts; or considering
the interests of Oregonians.
25.
Defendants caused Cover Oregon to do so in spite of the fact that it was Oracle’s
technology that enabled Cover Oregon to enroll more than 430,000 Oregonians in health
insurance or Medicaid in the first year of enrollment. Moreover, by the end of February 2014,
Oracle had substantially completed work on the remaining consumer-facing components of the
exchange, and Oracle advised Cover Oregon that the Oregon HIX could quickly be made ready
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26Page 12- Complaint
for a full launch. Had Cover Oregon conducted a fair, reasonable, and accurate evaluation of the
Oregon HIX and Oracle’s work on that project, on information and belief, it would not have
abandoned the Oregon HIX, and it would not have abandoned Oracle. To the contrary, it would
have elected to continue working with Oracle to maintain and support the Oregon HIX rather
than abandon the massive investment in the work and force thousands of Oregonians to re-enroll
in the federal exchange.
26.
The decision to abandon the Oregon HIX not only required countless Oregonians to re-
enroll using the federal exchange, but the transition to the federal exchange cost Oregon
taxpayers substantial additional dollars. According to the Wall Street Journal, the total cost of
moving to the federal exchange will be $41 million—$9.5 million of which would be borne by
Oregonians. In addition, at the time that Defendants orchestrated Cover Oregon’s decision to
abandon the Oregon HIX, the U.S. Supreme Court had accepted certiorari in King v. Burwell, a
case challenging the availability of subsidies for Americans purchasing healthcare insurance
through the federal insurance exchange. By causing Cover Oregon to abandon Oregon’s HIX,
Defendants put at risk the insurance subsidies that made health insurance affordable for a large
number of Oregonians and thus put many Oregonians at risk of losing their health insurance
altogether.
27.
During the campaign period, questions were raised about whether Kitzhaber campaign
operatives, specifically Defendant McCaig, were properly disclosing their roles in the Kitzhaber
campaign and properly distinguishing between campaign activity and official state business. For
example, on September 24, 2014, Willamette Week reported that McCaig had provided advisory
services to the Kitzhaber campaign that were not disclosed as in-kind contributions. Defendant
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26Page 13- Complaint
McCaig has also been accused of emailing a state official at the state official’s personal email
account to direct her to perform campaign functions. On information and belief, during the
campaign, Defendants failed to disclose their role as paid political operatives working for
Governor Kitzhaber’s reelection campaign and instead used the position of public trust and
confidence Governor Kitzhaber enjoyed to unduly influence Cover Oregon’s decision making.
As one former aide to Governor Kitzhaber wrote, “I voiced concerns about . . . the overlap of
campaign and state advisers [] and the ways they interacted with state business. . . . I was
adamant that the governor’s office and his closest advisers not blur the lines between state
interest and other matters. . . . Emails related to state business must be sent on official state
accounts. Campaign polling should not determine office activities. The law and rules of ethics
are not to be overlooked.” Indeed, on February 16, 2014, Defendant McCaig sent an email to
Governor Kitzhaber explaining that she was taking steps to not create a record of her
interference, stating that she was “being mindful of not putting too much on paper.”
28.
On information and belief, as a result of Defendants’ interference in the decision-making
process, Cover Oregon arbitrarily and capriciously severed its business relationship with Oracle,
abandoned its initial recommendation to stay with the state-based HIX and Oracle’s technology
(which would have been in the best interests of the people of the State of Oregon) and announced
instead that it would abandon the Oregon HIX—which had cost over $300 million to develop—
in favor of using the HIX developed by the federal government.
DEFENDANTS’ INTERFERENCE AT COVER OREGON
29.
Emails leaked to Willamette Week show that “[s]ince at least January [2014] . . . state
officials worked closely with Kitzhaber’s campaign staff” to influence Cover Oregon’s actions.
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26Page 14- Complaint
The leaked emails, as reported by Willamette Week and the Oregonian, show that “consultants
for [Governor Kitzhaber’s] re-election campaign orchestrated the decision to shut down Cover
Oregon and switch to the federal health care exchange.” In particular, the leaked records “show
[Defendant] McCaig oversaw the decision to shut down Cover Oregon rather than work with the
state’s contractor, Oracle Corp., to fix it.” The emails further demonstrate that “McCaig—rather
than the governor or state lawyers—drove the decision to sue Oracle. And McCaig routinely
directed senior government employees and staff in the governor’s office.” Similarly, the
Oregonian has quoted a former Cover Oregon employee as stating that Cover Oregon staff
“suspected that . . . policy direction was coming from (Kitzhaber’s) campaign staff,” and that
Cover Oregon’s decisions were based on the “the influence [such decisions] might have on
[Kitzhaber’s] campaign.” Records obtained by Willamette Week “also show McCaig and other
advisers based many of their moves on polling and how voters’ perceptions of Cover Oregon
might affect Kitzhaber’s hopes for re-election.”
30.
On February 7, 2014, for example, Governor Kitzhaber arranged a private conference call
among Defendants, Bruce Goldberg, the Cover Oregon Executive Director installed by Governor
Kitzhaber in December 2013, health care advisor Sean Kolmer, and others, to coordinate Cover
Oregon’s decisions regarding the exchange with his reelection campaign strategy. Bruce
Goldberg and Sean Kolmer were later named to the Cover Oregon workgroup tasked with
recommending whether to stay with the Oregon HIX or to transition to the federal exchange. On
information and belief, through this call and other similar meetings between Defendants and
Cover Oregon, Defendants induced Cover Oregon to serve the Kitzhaber campaign’s self-
interested political purpose of winning reelection by abandoning the Oregon HIX, blaming
Oracle for its failures, and ending Cover Oregon’s contractual relationship with Oracle. The next
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26Page 15- Complaint
day, on February 8, 2014, Defendant McCaig told Governor Kitzhaber that Defendant Raphael
would direct the governor’s staff on how to handle communications about Cover Oregon. On
information and belief, it was at or around this time that Defendant Raphael was put on the
Kitzhaber for Governor payroll.
31.
As described below, Defendants’ interference harmed Oracle in a number of ways.
Abandoning the Exchange
32.
On March 3, 2014—after Oracle had delivered working software code for a full launch of
the HIX—Cover Oregon announced that it would convene a workgroup “to advise on the best
options to move forward” with Oregon’s development of a HIX. The workgroup was originally
tasked to consider a range of options, including whether to (1) “continue to develop the [HIX] on
the current Oracle based technology and retain Oracle to deliver the solution,” (2) “continue to
develop the [HIX] on the current Oracle based technology but select a new technology delivery
systems integrator,” or (3) switch to an alternative exchange, such as the federal exchange,
Healthcare.gov.
33.
On information and belief, the workgroup dismissed the option to continue to develop the
HIX using the Oracle-based technology and retain Oracle to deliver the solution as a result of the
Kitzhaber campaign strategy formulated at meetings such as the February 7, 2014 meeting
among Governor Kitzhaber, Defendants and Bruce Goldberg and Sean Kolmer, who later served
on the workgroup.
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34.
On information and belief, Defendants’ interference with the workgroup’s decision-
making continued even after the workgroup had focused on the choice between continuing to
develop the HIX based on Oracle based technology with a new technology vendor or moving to
the federal exchange. According to reports published in the Oregonian, the workgroup’s initial
recommendation was to continue using the Oregon HIX and plan for a possible transition to the
federal exchange only if the Oregon HIX continued to experience problems and delays. The
initial recommendation established milestones through June, and achieving those milestones was
to determine whether Cover Oregon would continue with a state HIX or move to the federal
exchange. Throughout this period, Cover Oregon continued to seek Oracle’s consulting services
to further develop the HIX.
35.
On information and belief, Defendants used Governor Kitzhaber’s access and influence
to secretly apply personal pressure to direct the workgroup to ensure that its final
recommendation served the Kitzhaber reelection campaign, and was consistent with the false
narrative that Defendants had conceived. On information and belief, Defendants induced the
workgroup to abandon its initial recommendation, and decide instead that the Oregon HIX
should be shut down, and that Oregon should switch to the federal exchange, without a fair or
accurate vetting of the Oregon HIX. Emails leaked to Willamette Week show that on April 2,
2014, Defendant McCaig sent an email informing the Governor’s staff and campaign advisers
that, even though McCaig had no role in the workgroup’s or Cover Oregon’s deliberations, she
intended to “run tonight’s meeting” in which they would discuss the “content, process, and
timing” of the workgroup’s recommendations and Cover Oregon’s interim executive director,
Clyde Hamstreet, including his “contract, reporting authority, messaging [and] spokespeople.”
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36.
In fact, Cover Oregon’s decision was predetermined by Defendants in a strategy hatched
well before the workgroup made any recommendations. On April 9, 2014, Defendant McCaig
sent Governor Kitzhaber a memorandum titled “MANAGING/STAGING THE DECISION” in
which she laid out an eight-step process to create the impression of a thorough and well-reasoned
analysis of the technology on the merits, when in fact, as McCaig wrote in this memorandum:
“Regardless, the Cover Oregon Board would hear and accept the federal exchange
recommendation.” As part of that strategy, on information and belief, Defendants sought to
ensure that the decision about the future of Oregon’s HIX would be guided by political polling
data, rather than an independent, fair analysis of the underlying Oracle technology.
37.
While the workgroup was formulating its recommendations, Hamstreet publicly affirmed
the utility and value of the Oregon HIX. In particular, Hamstreet “pointed out that some aspects
of Oracle’s technology are already being used to process applications,” and that “217,413
Oregonians have signed up for health insurance coverage through Cover Oregon.” Hamstreet
cautioned, “I don't want to throw something away that has value.”
38.
Three days after Hamstreet’s remarks were reported, Defendant McCaig met with him in
a closed-door meeting to, as Hamstreet described in his invoice summary, “[w]ork on
coordination of proceedings.” Four days after that, on April 22, one of Hamstreet’s top aides
told Cover Oregon staff that Cover Oregon was likely to reverse course, and abandon the state-
based exchange. Oracle requested to provide information regarding the estimates and
evaluations being provided to Cover Oregon, but Oracle’s request was refused and Cover Oregon
abandoned its initial recommendation anyway.
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39.
On April 24, the workgroup—which had initially recommended that Cover Oregon
continue to use Oracle’s technology (presumably because it believed doing so was in the State’s
best interest)—now recommended abandoning the State’s exchange and using the federal
government’s exchange. The next day, Cover Oregon’s Board voted to abandon the exchange,
consistent with Defendant McCaig’s April 9th strategy memorandum.
40.
On information and belief, many Cover Oregon board members hoped to drop the federal
exchange by 2016 and set up an Oregon exchange using the Oracle technology. The Center for
Medicaid Services had committed $35 million in funding to continue work on the technology for
Medicaid enrollment. On information and belief, Cover Oregon board members hoped that this
technology would enable the state to operate its own exchange in 2016, using the Oracle
technology. Governor Kitzhaber began pressuring the Cover Oregon board to vote to
recommend that the corporation dissolve itself and that its responsibilities be transferred to a
state agency. On information and belief, Governor Kitzhaber did so in order to strengthen his
narrative that Oracle was to blame and end the public discussion of Oregon’s HIX.
41.
Some Cover Oregon board members and Mr. Hamstreet continued to feel that Cover
Oregon should “keep its options open,” and suggested that the decision to foreclose the option of
returning to a state exchange in 2016 was politically motivated. On information and belief,
Defendant McCaig led the push to shut down Cover Oregon and personally exerted improper
pressure on Mr. Hamstreet and other Cover Oregon board members to permanently abandon the
Oregon HIX and dissolve Cover Oregon.
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42.
On information and belief, Defendants’ actions, which were motivated by the self-
interested desire to further their own political objectives, and not by the best interests of
Oregon’s citizens, caused Cover Oregon to permanently abandon the Oregon HIX in favor of the
federal exchange. That decision was the product of the improper influence and direction of
Defendants. Defendants were not members of the Cover Oregon board or governance, nor were
they members of the workgroup. Instead, on information and belief, they enjoyed influence with
Cover Oregon workgroup members due to their association with the Governor and because they
did not disclose their status as paid campaign operatives, and they used that influence to control
the decision-making of Cover Oregon.
Withholding Payment For Services Rendered
43.
At Cover Oregon’s insistence, Oracle performed extensive services in connection with
readying the Oregon HIX for full launch between November 2013 and February 2014.
44.
Despite demanding these services be performed, Cover Oregon stopped paying Oracle’s
invoices and refused to sign Ordering Documents necessary for Oracle to bill for its services. As
a result, Cover Oregon owed Oracle more than $60 million by the end of February 2014.
45.
In late February 2014, Oracle executives met with Governor Kitzhaber to discuss the
money owed to Oracle and negotiate the circumstances under which Oracle would continue to
provide services to Cover Oregon. Governor Kitzhaber made clear that he wanted Cover Oregon
to “disengage” with Oracle. The Oracle executives met immediately thereafter with Cover
Oregon to discuss this directive. To their surprise, Cover Oregon personnel said they had no
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desire to stop working with Oracle on the project and that Cover Oregon needed and wanted
Oracle to continue working for an unspecified time into the future.
46.
Unbeknownst to Oracle, Defendants were secretly being briefed and receiving
confidential communications regarding these negotiations. On February 28, 2014, for example,
Governor Kitzhaber’s chief of staff sent Defendants Raphael, Looper, and Wiener an email
describing specific details of the confidential negotiations with Oracle. On March 2, 2014,
Governor Kitzhaber provided a confidential attorney-client communication regarding the status
of settlement discussions to Kitzhaber campaign staff and advisers, including Defendants
Raphael, Looper, and Wiener. Ultimately, Cover Oregon and Oracle executed agreements
regarding Oracle’s transition off the project and Cover Oregon’s payment of some—but not all—
of the amount owed to Oracle, apparently in order to keep Oracle working while providing
Governor Kitzhaber with the political ammunition he needed to further his reelection efforts by
saying he had somehow “fired” Oracle.
47.
On information and belief, Cover Oregon’s efforts to transition Oracle off the project, its
refusal to pay Oracle for all services rendered, and its disregard of its contractual obligations by
refusing to sign Ordering Documents came at the direction of Defendants and Governor
Kitzhaber, and were the result of Defendants’ exercise of undue influence over Cover Oregon
officials and members of the workgroup, aimed at forcing a decision that would benefit the
Kitzhaber reelection campaign, rather than serving the interests of the people of the State of
Oregon.
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Directing Congressional Testimony
48.
On March 21, 2014, the Governor’s chief of staff emailed one or more of the Defendants,
noting that the Committee on Oversight and Government Reform of the United States House of
Representatives had asked the then-Executive Director of Cover Oregon, Bruce Goldberg, to
testify before it regarding the Oregon HIX. The Governor’s chief of staff stated that the
Kitzhaber campaign “[n]eed[ed] to make a decision on this by Monday.”
49.
On April 2, Defendant McCaig emailed that the agenda for the meeting of Governor
Kitzhaber’ reelection team and top officials, which Defendant McCaig intended to run, would
include “Greg Van Pelt’s appearance [before Congress] tomorrow.” That same day, Defendant
Raphael, who had no official role in Cover Oregon or the development of the Oregon HIX, sent
an email to Nkenge Harmon Johnson, Governor Kitzhaber’s Communications Director, with
“priority changes” to the testimony to be delivered by Greg Van Pelt, an adviser to both the
Governor and to Goldberg, who was sent to testify before Congress instead of Goldberg.
Raphael’s email made clear that he and Defendant McCaig had altered Van Pelt’s testimony.
The testimony Van Pelt ultimately gave before Congress publicly and falsely blamed Oracle for
problems with the Oregon HIX.
50.
On information and belief, Defendants caused Greg Van Pelt to publicly and falsely
blame Oracle in his testimony before Congress.
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Deflecting Blame from Governor Kitzhaber’s Administration to Oracle
51.
On information and belief, Defendants engaged in a concerted campaign to ensure that
the Oregon HIX was abandoned without a fair or accurate technical assessment and to cause
Cover Oregon to falsely and publicly blame Oracle for any failures of the HIX.
52.
Carolyn Lawson, who was forced to resign as Information Technology Director at OHA,
has stated that OHA’s Communications Director told her that “[s]omebody has to be held to
blame” for problems with the Oregon HIX and that, although “[w]e want it to be Oracle . . . it
can be you if you want.” Ms. Lawson also stated that individuals associated with both OHA and
Cover Oregon organized and encouraged “a substantial cover-up, the purpose of which was to
protect selected individuals…while unfairly and untruthfully pointing the finger at others.” The
cover up included, according to Ms. Lawson, a “systematic—and factually false—messaging
campaign” that “centered on a ‘core story,’” a substantial part of which was to blame Oracle for
Cover Oregon’s failure to launch a publicly-facing website by October 2013.
53.
In addition to preventing Cover Oregon from conducting a fair and accurate evaluation of
the Oregon HIX and directing the congressional testimony of Greg Van Pelt, on information and
belief, Defendants also attempted to control messaging regarding the conclusions of First Data
Corporation (“First Data”), an outside consultant Governor Kitzhaber hired to review the
development of the Oregon HIX and assess, among other things, whether Oregon should sue
Oracle for its performance on the project. When First Data’s report was released on March 19,
2014, it placed most of the responsibility for the HIX difficulties on the State of Oregon and
Cover Oregon. Among other findings, the First Data report noted that Cover Oregon and OHA
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“had different, and sometimes competing priorities,” communication between the agencies “was
ineffective and at times contentious,” and the Oregon HIX project lacked “a consistent, cohesive
enterprise approach” to project management.
54.
Nonetheless, the response of Defendants and Governor Kitzhaber to this report was to
continue to blame Oracle. On March 20, 2014, Governor Kitzhaber wrote a letter to the Oregon
Attorney General, stating that it was “time to hold the state’s main contractor, Oracle,
accountable for its failures to deliver a working website.” Governor Kitzhaber also stated that
Oracle had missed deadlines on the Oregon HIX project and performed incomplete, substandard
work.
55.
At the same time, on information and belief, Defendants acted to take control of the
messaging regarding the Oregon HIX. On March 14, 2014—the same day First Data submitted
its report—Defendant Raphael sent an email to Governor Kitzhaber and other campaign
advisers, stating, “We need a process for quick, strategic responses to breaking stories and
reporter calls coming into the Governor’s Office, Cover Oregon and other agencies.” Raphael
also noted that “Nkenge [Harmon Johnson, Governor Kitzhaber’s Communications Director] and
Patty [Wentz, Communications Director for OHA] agree to contact Tim promptly upon receiving
reporter inquiries on anything other than routine Cover Oregon/IT related questions.”
56.
In the wake of Raphael’s instructions, OHA and Cover Oregon continued to falsely and
publicly blame Oracle for problems associated with the HIX. In the spring of 2014, Governor
Kitzhaber appointed health care policy advisor Sean Kolmer to the Oregon Health Policy Board,
an appointment which required senate confirmation. During his May 2014 confirmation hearing,
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Mr. Kolmer was asked about Cover Oregon, and Senate Republican Leader Ted Ferrioli publicly
opposed Sean Kolmer’s nomination. In response, Ms. Harmon Johnson, Governor John
Kitzhaber’s communications director, said, “[i]f you are looking for the party that promised but
did not deliver a fully functional insurance exchange website, you should look to Oracle.”
Governor Kitzhaber went to the capital to personally seek support for Mr. Kolmer’s nomination.
When neither Ms. Harmon Johnson’s comments nor Governor Kitzhaber’s personal appeals
shored up support for Mr. Kolmer’s nomination, Governor Kitzhaber withdrew the nomination.
Immediately thereafter, the Governor gave a press conference excoriating Oracle and demanding
that the Attorney General file suit against the company.
57.
As early as April 7, 2014, Defendant McCaig wrote to Kitzhaber stating that she had
spoken with the governor’s chief of staff about “announcing we’re going after” Oracle. On
information and belief, Defendant devised a plan to sue Oracle in order to change the public
narrative about the governor’s mismanagement of the Oregon HIX. On May 27, 2014,
Defendant McCaig drafted a letter to be signed by Governor Kitzhaber asking Oregon Attorney
General Rosenblum to “immediately initiate legal action” against Oracle. On the following day,
McCaig sent an email to the governor’s chief of staff and the governor’s general counsel,
directing them to coordinate with the Attorney General’s office on legal action against Oracle.
When the press reported the next day that Oregon was likely to sue Oracle, Defendant McCaig
sent Governor Kitzhaber an email saying “Headlines coming in are all good! . . . We’ve got
another first . . . First in the country to sue Oracle!”
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58.
On information and belief, OHA’s and Cover Oregon’s public and false blaming of
Oregon following the First Data report came at the direction of Defendants and was undertaken
for the purpose of furthering Defendants’ campaign strategy.
Defendants Benefitted from Governor Kitzhaber’s Re-Election
59.
Defendants had reason to believe that they would profit from their tight connections with
the Kitzhaber Administration and their efforts to secure his reelection to the detriment of the
Oregon HIX project and Oracle. On information and belief, each Defendant was a paid advisor
to Governor Kitzhaber who had a professional and personal stake in securing his reelection.
Each stood to obtain a position within the next Kitzhaber Administration or otherwise profit from
his or her close association with the next Administration
60.
On information and belief, Defendants’ gain extended to family members and business
associates in some instances. For example, in July 2014, OHA awarded Tim Raphael’s wife—
without any competition—a contract worth as much as $150,000. When this no-bid contract
became known, it was rescinded for violating state contracting rules. Eight days later, OHA
solicited bids from Raphael’s wife and two other firms; OHA awarded the contract to Raphael’s
wife even though her bid was nearly five times higher than the low bid of $32,250. Similarly,
Governor Kitzhaber appointed Patricia McCaig to be his “senior advisor” on the multibillion
dollar Columbia River Crossing highway project even while she was employed by the project’s
largest contractor.
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61.
Defendants’ conduct was wrongful. The use of personal influence by an incumbent’s
political campaign and campaign operatives to impact the decision-making of a public official or
public corporation violates established ethical standards of conduct. It is improper for campaign
workers to exercise undue influence over the actions of public employees by using their or
Governor Kitzhaber’s personal influence. Campaign workers and campaigns are tasked with
ensuring that their candidate is elected. Persons holding political office are tasked with acting—
and are vested with power and authority to act—in the best interests of their constituents. Failure
to maintain clear lines between the actions of the candidate and the actions of the elected official
creates a conflict of interest and constitutes unethical behavior. When Defendants, paid campaign
workers, tampered with the decision-making of Cover Oregon, they used the power and
influence afforded them by their association with Governor Kitzhaber to shape the decision-
making of an independent public corporation. These actions were unethical and improper.
Defendants intended to cause—and knew their conduct would cause—interference with Oracle’s
relationship with Cover Oregon and harm to Oracle.
Defendants’ Interference Harmed Oracle
62.
As a result of Defendants’ interference, Oracle suffered and continues to suffer extensive
economic harm. Oracle was not paid at least $23 million owed to it by Cover Oregon as a result
of Defendant’s misconduct.
63.
In addition, on information and belief, Cover Oregon’s decision to abandon the Oregon
HIX in favor of the federal exchange, as caused by Defendants, caused Oracle to lose revenue
that would have been earned through future work to support the Oregon HIX. Because Oracle
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had supplied substantial portions of the technology underlying the Oregon HIX, Oracle had a
reasonable expectation that it would have been awarded future work as a technology provider to
maintain, support and/or upgrade the Oregon HIX as well as the related Modernization program,
and to provide hosting services for both projects.
64.
Cover Oregon’s decision to abandon the Oregon HIX and its false and public blaming of
Oracle for any failures of the HIX, as caused by Defendants’ interference, including without
limitation through the press messaging and congressional testimony directed by Defendants,
caused substantial damage to Oracle’s business reputation. Oracle is a major technology and
service provider in the market for large-scale government IT contracts. For example, in the case
of state and federal health insurance exchanges alone, Oracle has developed and implemented the
exchanges of at least a half dozen states and has substantially assisted in the development of the
federal exchange. The negative impact to Oracle’s business reputation caused by Defendants’
interference has impaired, and will continue to impair, Oracle’s ability to compete for such
government IT contracts. In addition, on information and belief, Defendants’ actions caused
Oracle to lose prospects for future work with the State of Oregon unrelated to the Oregon HIX.
On information and belief, Oracle has failed to obtain IT contracts both in and outside of Oregon
as a result of Defendants’ interference.
CLAIM FOR RELIEF
65.
Plaintiff incorporates by reference each of the preceding paragraphs as if fully set forth in
this paragraph.
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66.
Defendants, who were third parties to the business relationship between Oracle and
Cover Oregon, and had no formal role at Cover Oregon, intentionally and wrongfully interfered
with Oracle’s business relationship with Cover Oregon, including by (a) causing Cover Oregon
to refuse to pay Oracle for services Oracle provided (and which Cover Oregon had specifically
demanded); (b) causing Cover Oregon to blame Oracle for the failed launch of the Oregon HIX,
even though Oracle neither caused nor substantially contributed to the failure; and (c) causing
Cover Oregon to fail to evaluate the Oregon HIX appropriately, fairly, and accurately, which led
it to abandon the Oracle technology and alter its ongoing relationship with Oracle to Oracle’s
detriment and to refuse to do business with Oracle going forward.
67.
As a result of Defendants’ interference, Oracle suffered and continues to suffer damage to
its business reputation, was not paid at least $23 million owed to it by Cover Oregon, lost the
opportunity to continue to assist in the implementation and support of the Oregon HIX, and its
prospects for future work with the State of Oregon have been negatively impacted.
68.
Defendants’ actions were motivated by improper purposes, including (a) their self-
interested purpose of preventing Cover Oregon from fairly and accurately assessing the Oregon
HIX on its merits and thereby preventing the State of Oregon from running its own state-based
insurance exchange; (b) their purpose of ensuring that Cover Oregon falsely and publicly blamed
Oracle for any failures of Cover Oregon in order to deflect blame from Governor Kitzhaber and
his Administration; (c) their intent to unduly influence the decision-making of an independent
public corporation; and (d) their intent to coerce Cover Oregon and its employees to serve the
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Kitzhaber reelection campaign’s goals rather than carrying out Cover Oregon’s statutory
obligation to act for the benefit of the citizens of Oregon.
69.
Defendants’ acts of interference were not performed to promote an interest of equal or
superior social value to Oracle’s interests in its contractual and business relationships with Cover
Oregon, including Oracle’s interests in having its technology fairly assessed, being paid for
services rendered, and in earning revenue through prospective work to support the Oregon HIX.
Nor did Defendants’ acts of interference serve a greater social value than the interests of the
citizens and businesses of Oregon in obtaining health insurance coverage for themselves, their
families and their employees, or the interests of Cover Oregon in maintaining independence from
acts of political expediency, being allowed to fairly and accurately evaluate the Oregon HIX, and
fulfilling its legislative purpose. By causing Cover Oregon to abandon Oregon’s HIX,
Defendants put at risk the insurance subsidies that made health insurance affordable for a large
number of Oregonians and thus have put many Oregonians at risk of losing their health insurance
altogether. Cover Oregon’s decision, therefore, was contrary to the express legislative purposes
in creating Cover Oregon. Moreover, as evidenced by the press surrounding these events,
Defendants’ conduct is recognized by the public to be unethical. No privilege applies to
Defendants’ conduct, and to the extent any privilege was otherwise applicable, it has been
abused and therefore lost.
70.
Defendants’ interference with Oracle’s business relationship was also achieved through
improper means, including (a) using the trust, access, power and confidence Governor Kitzhaber
enjoyed to secretly insert themselves into, tamper with, direct, and improperly influence the non-
public, internal decision-making of an independent public corporation; (b) failing to disclose
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their role as paid political operatives working for Governor Kitzhaber’s reelection campaign;
(c) inducing public officials to act inconsistently with their ethical obligations under Oregon’s
Government Ethics Laws by, for example, sharing confidential information gained in the course
of or by reason of holding a position as a public official to assist the Governor’s reelection;
(d) causing public employees to act inconsistently with their obligations under Oregon’s Little
Hatch Act, O.R.S. § 260.432, by, for example, expending their official time and valuable
services in furtherance of Governor Kitzhaber’s campaign for re-election; (e) encouraging public
employees to provide such time and services but failing to record them as in-kind contributions
and expenditures, as required by Oregon campaign finance laws; and (f) secretly acting to shape
congressional testimony and the conclusions of purportedly autonomous groups advising Cover
Oregon.
71.
Accordingly, as a direct and proximate result of Defendants’ repeated interference in
Oracle’s current and prospective business relationship with Cover Oregon, Oracle has sustained
damages in an amount that is to be proven at trial but is no less than $33,180,000. Oracle has
sustained damages as follows:
(a) no less than $23,000,000 as a result of Defendants’ interference having caused
Cover Oregon to fail to pay such amount owed to Oracle;
(b) no less than $10,000,000 as a result of Defendants’ interference having caused
Oracle to lose revenue that it would have earned through future work in hosting
services, technical support, software licensing fees, and consulting services to
maintain, support, update and/or upgrade the Oregon HIX and the related
Modernization program, and to provide hosting services for both projects; and
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(c) no less than $180,000 as a result of Defendants’ interference having damaged
Oracle’s business reputation and impaired Oracle’s ability to compete for and
secure other IT contracts with the State of Oregon and with other customers and
potential customers.
Oracle reserves the right to amend the Complaint to seek punitive damages pursuant to O.R.S. §§
31.725 and 31.730.
PRAYER
72.
WHEREFORE, plaintiff Oracle prays for relief against Defendants as follows:
(a) for a judgment in favor of Oracle and against Defendants in an amount of
damages of no less than $23,000,000 as a result of Defendants’ interference
having caused Cover Oregon to fail to pay such amount owed to Oracle;
(b) for a judgment in favor of Oracle and against Defendants in an amount of
damages of no less than $10,000,000 as a result of Defendants’ interference
having caused Oracle to lose revenue that it would have earned through future
work in hosting services, technical support, software licensing fees, and
consulting services to maintain, support, update and/or upgrade the Oregon HIX
and the related Modernization program, and to provide hosting services for both
projects;
(c) for a judgment in favor of Oracle and against Defendants in an amount of
damages of no less than $180,000 as a result of Defendants’ interference having
damaged Oracle’s business reputation and impaired Oracle’s ability to compete
for and secure other IT contracts with the State of Oregon and with other
customers and potential customers;
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(d) for prejudgment interest at a statutory rate of 9% annum; and
(e) for such other relief as the Court deems appropriate.
By: s/Daniel J. Dunne
Daniel J. Dunne, OSB 120302Orrick, Herrington & Sutcliffe LLP701 5th Ave., Suite 5600Seattle, WA 98104-7097Ph: (206) 839-4300Fax: (206) [email protected]
Counsel for Plaintiff Oracle America, Inc.
and
Karen G. Johnson-McKewanRobert S. ShwartsOrrick, Herrington & Sutcliffe LLP405 Howard StreetSan Francisco, CA 94105-2625Ph: (415) 773-5700Fax: (415) [email protected]@orrick.com
Of Counsel for Plaintiff Oracle America, Inc.
and
Jamie GorelickEdward N. SiskelCharles C. SpethWilmer Cutler Pickering Hale and Dorr LLP1875 Pennsylvania Ave.Washington D.C. 20006Ph: (202) 663-6000Fax: (202) [email protected]@[email protected]
Of Counsel for Plaintiff Oracle America, Inc.
