The law enforcement arm of the inspector general of the U.S. Department of Health and Human Services has also launched at least a preliminary inquiry into potential spillover from Cover Oregon into the state's Medicaid-funded Oregon Health Plan, The Oregonian has learned.
Meanwhile, both the Government Accountability Office and the U.S. House oversight committee have announced their own investigations.
It is unclear how far along the FBI and HHS inquiries are, or how vigorously they are being pursued. State and Cover Oregon officials haven't been contacted by either agency, spokespeople said Friday.
Patrick Sheehan, a former Republican legislator from Clackamas County who says he relayed allegations of potential wrongdoing to the FBI in late 2012, says the agency contacted him two months ago to follow up, leading to a 90-minute meeting with a Portland-based FBI agent.
Sheehan's allegation involved passing on suspicions he heard that Oregon had shown the federal government a misleading website demonstration to ensure the continued flow of federal money.
The Oregonian has interviewed other sources, who spoke on condition of anonymity, that said the FBI has contacted other people besides Sheehan. However, it remains unclear whether this is a full-blown investigation.
An FBI spokesperson declined to comment.
The key challenge facing any prosecutor is proving criminal intent, the threshold needed for a criminal case. Did state officials paint an inaccurately rosy picture of the struggling health exchange? And if so, did they do so with intent to defraud the federal government? Or were they just unduly optimistic or out of touch with reality?
Bob Weaver, a former assistant U.S. attorney who specializes in white-collar crime, said, "It seems to me that this would be a hard, hard case to prove criminally unless there was some sort of false statements made in order to get a drawdown of the money. That would be a nice clear-cut false claims case."
"But if it's just a bunch of people who don't know what they're doing, that's a really hard criminal case to make," Weaver said.
The various state exchanges were funded by the U.S. Center for Medicare and Medicaid Services. As of March 28, it had awarded $4.7 billion in grants nationally. Oregon has been awarded $303 million in five increments.
Typically in federally funded projects, states must show evidence they've met certain milestones before they get additional grants. In Oregon's case, the Oregon Health Authority at first, and later Cover Oregon, had several "gate reviews" where federal officials reviewed progress on the project.
Documents show Oregon may have presented a misleading picture to the federal government.
On May 9, 2012, Legislative IT oversight analyst Bob Cummings wrote to the leaders of the Cover Oregon project, mentioning that he and Ying Kwong, an oversight analyst for the state Department of Administrative Services, shared the same concerns about the health insurance exchange. "Ying and I are very concerned about the overly positive reports that are coming out that are not consistent with what we are seeing related to project progress," Cummings wrote.
"The overly positive presentation provided to the feds early this week ... provided a skewed (or at least incomplete) picture of where we're actually at given what Ying and I have seen over the past couple of months," Cummings wrote. "I recognize the need to be positive with the feds, but I saw major disconnects from what was stated and where we're at. In addition, I was concerned about the statement that (the exchange) 'has completed its last hurdle with the Legislature.' This simply is not true."
Another vocal critic was Exeter Group, a Massachusetts technology firm that wanted to supplant Oracle Corp. as the state's lead technology contractor.
In an Oct. 11, 2012 email, Cummings relayed criticism to Carolyn Lawson. He wrote that Exeter felt Oregon had used "smoke and mirrors," including presenting a demonstration to the feds that was "little more than what" an Exeter executive – formerly with Oracle -- "had built as a 'demo' for Oregon."
Cummings was referring to Matthew Cahir, Exeter senior vice president for global sales. Cahir declined to comment for this story.
KATU, which along with The Oregonian obtained the Oct. 11 email, reported April 29 that a lawyer for Matthew Cahir said there is an active FBI investigation.
It wasn't just Cummings and Cahir who felt Oregon officials were putting an inaccurately happy face on the situation. A report prepared for Gov. John Kitzhaber by Atlanta-based First Data found that, at times, Cover Oregon officials presented rosier status reports to the federal government than its internal reports did.
Sheehan, the former lawmaker who sat on the Legislature's IT oversight committee, is now a close campaign aide to gubernatorial candidate Rep. Dennis Richardson, R-Central Point. But he said his political role is not affecting his message, and noted he did not contact the media.
Sheehan said the FBI agent interviewing him appeared well-prepared and focused her questions on the gate reviews where the Oregon Health Authority and Cover Oregon reported on progress to the federal government.
Another federal office that has expressed interest in the Cover Oregon debacle is the Health and Human Services' inspector general. It employs auditors, as well as a law enforcement arm, that employs special agents to focus on alleged fraud and similar investigations.
In March, a Portland-based special agent for the inspector general opened an inquiry into an anonymous letter sent by state employees to lawmakers, The Oregonian has confirmed.
The anonymous letter alleged that the state's effort to deal with Cover Oregon problems had compromised the integrity of the Oregon Health Plan, including that ineligible applicants, such as undocumented immigrants, had inadvertently been granted full OHP benefits.
The letter also claimed state officials ordered false information to be systematically entered into the state's Medicaid information system in order to start benefits.
Asked about the letter, Oregon Health Authority officials downplayed or disagreed with its claims, but said the state was in the process of correcting a problem that had led to as many as 3,800 ineligible applicants receiving full benefits. OHA has since adjusted that figure downward to about 2,300 people, and officials say it has been corrected.
©2014 The Oregonian (Portland, Ore.)
