New reports show U.S. House committee divided on blame for Cover Oregon failure

A screenshot of the Cover Oregon website. (KATU File Photo)

PORTLAND, Ore. - Republican members of a U.S. House oversight committee sent letters to Oregon's attorney general and the U.S. attorney general demanding that they start an independent criminal investigation into Oregon's failed health insurance exchange, Cover Oregon, and all of its players, including former Gov. John Kitzhaber.

The Republicans on the U.S. House Committee on Oversight and Government Reform released a scathing staff report Wednesday about its year-long investigation into Cover Oregon. It accused Kitzhaber and his team of putting politics before helping thousands of Oregonians buy health insurance.

"Our investigation shows Oregon state officials misused federal funds, and improperly commingled official and political resources for the purpose of enriching the political prospects of then-Oregon State Governor John Kitzhaber," committee Chairman Jason Chaffetz, a Republican from Utah, wrote U.S. Attorney General Loretta Lynch.

The 204-page report covers a lot of what KATU's On Your Side Investigators uncovered more than two years ago. Even as KATU and other media outlets exposed the problems of Cover Oregon, Kitzhaber ran for re-election and won a historic fourth term as Oregon's governor.

He resigned a month after being sworn into office for the fourth time, not because of the controversy surrounding Cover Oregon, but because he and his fiancée, Cylvia Hayes, became embroiled in an alleged influence-peddling scandal involving Hayes' private contracts as a renewable energy consultant.

The Republican report laid out how badly Cover Oregon was managed and the steps the Kitzhaber administration took to cover it up.

The report prepared by the committee's Republican staff alleged that the Cover Oregon leadership team falsified a presentation to the Department of Health and Human Services to continue receiving federal money for the website. The focus of that fake presentation was a dummy website designed to fool the feds.

The Republican report said Oregon wasted $305 million of taxpayers' money.

On Feb. 13, 2015, the same day Kitzhaber announced he would resign, the committee sent Kitzhaber and his office a letter ordering him to preserve and produce documents pertaining to Cover Oregon so it could review them for its investigation. The FBI also started its own investigation into Kitzhaber and Hayes. That investigation is still underway.

The Republican committee said that it received more than 170,000 pages of documents from Oregon and the Centers for Medicare and Medicaid Services and Oracle, the company that built the website. It also took testimony from five witnesses.

In his letter to Rosenblum, Chaffetz requested that she appoint a special counsel and that she recuse herself from the investigation.

"Given your role in the ongoing litigation and closeness to several of the prospective defendants, we expect you and any other similarly-conflicted aides will be recused, and a special prosecutor be appointed forthwith," he wrote.

Allegations of Secrecy

The Republican committee found that some members of Kitzhaber's staff and advisers secretly managed the project after the website failed to launch in the fall of 2013.

Its report included emails between Kitzhaber and his campaign staff and his official staff that the public hasn't seen until now.

The Republican committee said Kitzhaber and his team broke the law in secretly managing Cover Oregon, because according to state law the state wasn't supposed to control Cover Oregon. It was merely supposed to provide oversight.

The report said "the governor's office mixed campaign business and official business" and that his campaign re-election team tried to "change the narrative in the media" because it felt Kitzhaber was getting too much negative coverage because of the Cover Oregon scandal.

The Republican members of the committee found that Kitzhaber appeared to have "commingled" his campaign funds with state business.

In a deposition before the committee, Patricia McCaig, a key campaign adviser to Kitzhaber, testified that "what we did was use funds that were available out of the campaign to add capacity, in an appropriate and legal way, to work to support the Governor. It's campaign funds that can be used to support the Governor in his official capacity."

As the state's health insurance website lay in shambles, Kitzhaber's political operatives, not Cover Oregon board members, worked to move from Cover Oregon to the federal exchange, the committee said.

"The Governor's campaign advisers staged the decision to create the appearance that it was the (Cover Oregon) Board's decision to move to In fact, they manipulated the process to make their preferred outcome - moving to - the most likely outcome," the committee wrote in its report.

According to the Republican committee's report, Kitzhaber's campaign consultants also "orchestrated a letter to Oregon Attorney (General) Ellen Rosenblum" to sue Oracle, which was the company that built the website.

Republican committee members said Kitzhaber's camp duped Oregon's attorney general into going after Oracle to take the negative spotlight off of the governor.

In his letter to Lynch, Chaffetz also blasted state officials for using personal email to conduct state business pertaining to Cover Oregon, alleging that "they wanted to shield those communications from public records requests."

Democrats issue dissenting report

Democratic staff on the committee were excluded from working on the report, so they issued their own report Wednesday morning. In it they blame Oracle for the failures of the Cover Oregon website.

Rep. Elijah Cummings, a Democrat from Maryland, also sent letters to the U.S. Attorney General and to Oregon's Attorney General to explain the second report.

In those letters, Cummings called out Chaffetz, and the Republicans, for not deposing or interviewing any Oracle employee for their report. Cummings goes on to write that Chaffetz chose to issue his report as an unofficial staff report and not as an official report of the entire committee.

Cummings accused the Republicans of "omissions and inaccuracies" in their report, and said a staff report doesn't promote accuracy, completeness, or minority views.

In a statement to KATU, Kitzhaber called the Republican report partisan.

"(It's) another example of the kind of partisan politics that has left so many Americans disillusioned and distrustful of Washington, D.C.," he wrote.

He also disputed the Republicans' claim that his office manipulated the state's move to the federal exchange.

"The simple truth is that we made the decision to move away from Oracle's website to the federal technology because it was the most cost-effective and least risky way to ensure a fully functioning website by the second enrollment period which began in November 2014," he said.

He said allegations that the money was wasted ignores the fact that in the end 95 percent of Oregonians now have health insurance.

Oracle's Response

Ken Glueck, senior vice president at Oracle Corporation, said Wednesday the company feels "pretty vindicated" by the Republicans' report.

Glueck took issue with the report by the panel's minority members, saying Democrats never responded to company requests for meetings and conducted no analysis of their own. Glueck said Oracle would welcome any independent probes by the Justice Department or the state.

The Associated press contributed.

Here's Kitzhaber's response to the investigation:

Statement from Kristina Edmunson, spokeswoman for Oregon Attorney General Ellen Rosenblum:

The House Oversight Committee's Republican majority staff report on Oregon's failed health exchange is politically motivated. It's that simple. This staff report is part of Oracle's coordinated PR strategy to hide the real issues in this ongoing legal battle.

The report ignores basic facts, disregards Oracle's failures, and downplaysor entirely omitskey evidence. Attorney General Rosenblum's decision to sue Oracle in August, 2014 was never a political calculation. Instead, the decision was based on getting Oregonians their money back after Oracle was paid $240 million dollars for a health exchange that never worked. Oracle is desperately trying every possible maneuver it can find to undermine Oregon's strong case against the corporation.

Now, they are so desperate that they have even gone to Congress looking for positive media spin because they know that if this case goes to court, they will lose.

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