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Federal Investigation into Cover Oregon Costing Ore. Taxpayers $146K

Tuesday, October 21, 2014


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A federal investigation into Cover Oregon, the state's failed health exchange website, has cost Oregon taxpayers over $146,000 so far. And that figure looks likely to rise. 

So far, the law firm hired to represent the state in a pending FBI investigation has invoiced for over $123,000 and the state fund set up to represent employees embroiled in legal trouble has spent over $23,000, according to records obtained by GoLocalPDX. 

“The price for two years of gross mismanagement at Cover Oregon keeps adding up, especially because the current administration doesn’t have a problem throwing good money after bad," Senate Republicans spokesman Michael Gay said. “Lawsuits and ongoing investigations from the FBI and others just mean more costs to taxpayers for a project that is being mothballed." 

Oregon has been reeling since its health exchange website failed to launch last year, prompting the resignation of several employees. Multiple state and federal investigations have been launched and the state and its largest technology contractor on the job, Oracle, are sueing one another. The state announced plans earlier this year to mothball the project and turn the exchange over to federal control. 

The FBI is investigating how the state spent over $250 million in federal grant money on a website that failed to launch. 

Six former Cover Oregon employees: Triz DelaRosa, Bruce Goldberg, Rocky King, Aaron Karjala, Steve Powell and Carolyn Lawson were named in the federal subpoena, Department of Administrative Services spokesman Matt Shelby said. Their legal fees are covered by the state up to $35,000. 

The state adopted the legal fee coverage earlier this year in response to a federal grand jury subpoenaing documents related to the Cover Oregon collapse.  There is a cap of $35,000 per employee and so far the coverage has been for six former Cover Oregon employees who were named in the subpoena. 

The Oregon Department of Justice, meanwhile, has contracted with the Garvey, Schubert and Barer law firm to represent the state in the federal investigation. The contract is for $100,000 but the law firm has already invoiced for more than that.

Cover Oregon officials declined to comment on the rising costs.  

“I don't have any information for you,” Elizabeth Cronen, Cover Oregon spokeswoman, said. “We cannot comment on legal matters.”

The Governor’s office defended Oregon’s health care initiatives, saying, despite the website's failure, 95 percent of Oregonians are now covered under some kind of health insurance policy. 

“Going forward, the Governor supports a less risky and less costly path to deliver Cover Oregon's remaining functions,” spokeswoman Melissa Navas said. “The Governor believes that incorporating the exchange into existing state agency functions offers the fewest risks to Oregonians purchasing health insurance."

Whether the cost of the Cover Oregon investigations could rise or other employees could become the target of the federal investigation is up in the air as federal officials are mum on the state of pending reviews. 

Probes Drag On 

A federal grand jury subpoenaed documents from the state over the summer, but the U.S. Attorney's office won’t comment on the status of the investigation. Several media reports revealed earlier this year that a handful of federal agencies, including the Inspector General and the Government Accountability Office, would also be probing the Cover Oregon debacle. 

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Earlier this year, U.S. Rep. Greg Walden, a Republican, personally called for the GAO to review Cover Oregon. 

It’s unclear how long that will take, however, as it appears the probe hasn’t started yet. 

“We are first looking at all 50 states and the District of Columbia to determine how they [different states] have used federal funds for IT projects to establish, support, and connect to health insurance marketplaces that are required by the Affordable Care Act,” GAO spokesman Chuck Young said. “This will help inform our more in depth work on selected states, which is expected to begin after the broader work is completed.”

Multiple media outlets have reported that The Office of Inspector General U.S. Department of Health and Human Services will be looking into Cover Oregon. But Monday, Don White, health and human services spokesman, would not comment on the status of the investigation. 

Adding Up 

In addition to the legal fees related to the Cover Oregon investigations, the state could be on the hook for over $1 million in legal fees related to lawsuits with Oracle. The state and the technology company have filed dualing lawsuits, blaming each other for the failed healthcare exchange. The two sides go to court in November to determine if their cases will be heard in state or federal court. 

It’s possible Oregon could get back its legal costs if it wins some of the $5.5 billion in damages it is suing Oracle for.

“It all depends on whether or not we get a payback for this,” said David Friedman, a Willamette University associate professor of law. “We could get an enormous payback for it or we could get nothing. It’s probably somewhere in between.” 

What happens next is anybody’s guess and the fight between Oracle and the state will likely drag on. 

“It’s easier to predict the weather than predict what’s going to happen here,” Freidman said. 


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