Kitzhaber's Secret Weapon

Kitzhaber, a Democrat facing re-election, had built a reputation as a health care reformer. But his failure to make Cover Oregon work threatened his legacy.

In public, Kitzhaber assured Oregonians he was working diligently with state officials to find a solution for the website's woeful performance.

In private, however, Kitzhaber handed oversight of the Cover Oregon mess to a secretive campaign consultant who liked to call herself the Princess of Darkness.

By her own admission, Patricia McCaig knew virtually nothing about health care reform or the reasons Cover Oregon had crashed. Her primary mission was not to save a beleaguered state program but to get Kitzhaber re-elected.

Emails that Kitzhaber's office tried to delete from state computers show McCaig was effectively in charge of all decision making for Cover Oregon beginning in February 2014. 

Records show McCaig oversaw the decision to shut down Cover Oregon rather than work with the state's contractor, Oracle Corp., to fix it. 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.

The records 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.

Kitzhaber didn't respond to questions for this story.

McCaig declined to be interviewed, but in an emailed statement to WW, she said Kitzhaber turned to her because of her experience as a governor's chief of staff and an elected official. (She worked for former Gov. Barbara Roberts and served on the Metro Council for one term in the 1990s.)

She says she did nothing wrong.

"The governor was forced to respond to the 'debacle' of Oracle's failure to deliver a working website for Cover Oregon by using the best tools and people at his disposal," she says. "Oracle's contention that politics drove the failure of Cover Oregon could not be further from the truth."

But observers say Kitzhaber placing the state's response to Cover Oregon in the hands of his chief political adviser is problematic.

"If they made decisions based on Kitzhaber's personal political interests rather than what was best for taxpayers, that's not right," says David Friedman, an associate professor at the Willamette University College of Law. "It just looks bad.” 

WW first reported in November that Kitzhaber relied on campaign consultants to help direct his response to Cover Oregon (“Blurred Lines,” WW, Nov. 12, 2014). The newly obtained emails provide a far more detailed account of that effort. 

State ethics and elections laws require a separation between political activity and official decisions. Congress, which paid for the Cover Oregon project, now wants to know where taxpayer dollars went and whether Kitzhaber put his re-election interests ahead of the public interest.

The emails between Kitzhaber and McCaig about Cover Oregon are among those Kitzhaber sought to have removed from state servers Feb. 5, claiming they contained personal communications. But Kitzhaber's personal email accounts also relate to public business and are subject to disclosure under Oregon's public records law. Federal investigators have requested the emails as part of a criminal subpoena. 

On Feb. 13, investigators for the U.S. House Committee on Oversight and Government Reform wrote to Kitzhaber demanding all documents relating to his campaign staff's involvement with Cover Oregon, adding that decisions "may have been based on politics, not policy and campaign advisors working on your re-election campaign may have coordinated the state's response to the Cover Oregon roll-out."

Kitzhaber resigned Feb. 18 amid state and federal criminal investigations into allegations of influence peddling involving himself and former first lady Cylvia Hayes. The intensified congressional scrutiny could only add to his legal woes.

McCaig has played a unique role in Kitzhaber's career. 

She ran his successful 2010 election campaign. Soon after he took office, Kitzhaber made her his top adviser on the Columbia River Crossing, the proposed $3 billion highway project connecting Portland and Vancouver, Wash. McCaig then worked for the CRC's top contractor, David Evans & Associates ("The Woman Behind the Bridge," WW, Feb. 27, 2013). McCaig eventually collected $553,000 for her work on the CRC, which was never built.

Cover Oregon was another big Kitzhaber initiative. The website was supposed to allow Oregonians to purchase health insurance online.

But the project missed its "go-live" deadline Oct. 1, 2013 and never worked properly. By early 2014, Kitzhaber was taking a political beating over the failure from The Oregonian, which reported in detail his failure to oversee the project.

In early February 2014, McCaig emailed Kitzhaber, offering to take over damage control for Cover Oregon.

"I'd also like to request any publicly available information on the independent review—it's charge timeline, etc," McCaig wrote to Kitzhaber Feb. 6, 2014. "Let me know if you'd rather I let it all alone."

“No not at all,” Kitzhaber responded that same day. â€œI like it when you don’t leave things alone (like my last campaign for example).”

McCaig told Kitzhaber his current approach was failing. She proposed that his chief of staff, Mike Bonetto, blend his official duties with a campaign-led effort on Cover Oregon.

"We need more accountability and follow-thru from the campaign and some specific, intensive management of the Cover Oregon issues.  I do not think the governor's office has the staff capacity on the Cover Oregon piece," McCaig wrote Feb. 8. "How about? Mike chairs a joint campaign and key staff meeting weekly starting ASAP. I staff him (quietly, privately)."

On Feb. 8, McCaig told Kitzhaber that Tim Raphael, a lobbyist and former Kitzhaber spokesman, would direct the governor's staff on how to handle communications about Cover Oregon. Kitzhaber's campaign would put Raphael on its payroll.

"To do that [Raphael] would identify what Mike [Bonetto] and [Kitzhaber's state spokeswoman] Nkenge [Harmon Johnson] need to be managing from the gov's office, bridging the information gap with the campaign, and most importantly identifying and teeing up the critical and emerging Cover Oregon issues for the combined team so we can develop a plan and be more prepared both at the state level and the campaign," McCaig wrote.

"You have know idea how much better this makes me feel," Kitzhaber wrote her back the same day. "You truly are a Princess. How did I get so lucky to be on your team?” 

"Because you are you and you are governor of the great state of Oregon," McCaig responded. "And I believe."

McCaig told Kitzhaber she was being careful not to create a record of her actions—"being mindful of not putting too much on paper," she wrote in a Feb. 16, 2014, email.

She also acknowledged, in preparing a Cover Oregon battle plan, that she knew almost nothing about the issue. "I have no pride of authorship, and barely know enough about the topic to write the goals," she wrote in the same email.

By March 2014, emails show, McCaig was in full control of Cover Oregon. She routinely advocated keeping key details concealed from the public. For example, when the state was preparing responses to the U.S. Government Accountability Office, the investigative arm of Congress, McCaig argued against sharing information with Oregon Attorney General Ellen Rosenblum.

"Why is the AG reviewing?" McCaig wrote in a March 20 email to Kitzhaber and Bonetto. "Sending it to the AG could produce questions and allow speculation there is criminal behavior. It escalates the concern, gives the press another place to keep/promote a negative narrative, and expands external reviews." (Disclosure: Rosenblum is married to WW publisher and co-owner Richard Meeker.)

Kitzhaber  continually expressed his appreciation for McCaig's help. 

"HAPPY BIRTHDAY PRINCESS!!!" he wrote her March 30, 2014. "Your Faithful Friend and Fan. I am glad you are in my Life."

In April, Cover Oregon's board of directors was supposed to decide whether it should abandon the state's Oracle-built system and switch over to the federal government's health insurance exchange.

But records show McCaig had already made the call. In an email dated April 9, 2014, McCaig presented Kitzhaber with a memo titled "MANAGING/STAGING THE DECISION." She laid out an eight-step process that would provide the illusion of deliberation. "Regardless, the Cover Oregon Board would hear and accept the federal exchange recommendation," McCaig wrote.

The emails also show McCaig orchestrated the state's legal strategy against Oracle. Polling showed voters blamed the governor for Cover Oregon's failure. McCaig wanted Kitzhaber to demand money back from Oracle.

"We need to start the discussion from a different place," McCaig wrote to Kitzhaber on April 7, 2014. "Mike [Bonetto] and I talked offline about Oracle—we're leaning, regardless of which option, of announcing we're going 'after' them."

McCaig added in a May 19, 2014, email to Kitzhaber: "We need to show the taxpayers that we are going after the money. It doesn't really matter if it is $200 million or $40 million, or how many people enrolled, until we make it clear that we’re going after the money.” 

On May 27, 2014, McCaig drafted a letter for Kitzhaber to send to Rosenblum: "Dear Attorney General Rosenblum I am writing today to ask you to immediately initiate legal action to recover payments and other damages from Oracle."

The next day, in an email, McCaig told Bonetto and the governor's general counsel, Liani Reeves, to coordinate with Rosenblum's office. 

Then, success: Politico, an influential Washington, D.C., news website, highlighted the looming lawsuit. "Headlines coming in are all good! Politico is great," McCaig wrote to Kitzhaber on May 29. “We’ve got another first….  First in the country to sue Oracle!”

KGW TV reported that day a poll showing Kitzhaber leading his Republican opponent for governor, state Rep. Dennis Richardson, by 15 percentage points. 

“If true this may require an extra round of whiskey,” Kitzhaber wrote McCaig on May 29. 2014. 

"If true, two extra rounds," she replied.

By mid-June, McCaig told Kitzhaber their Cover Oregon media strategy was working.

"Quite a week," she wrote to him on June 13, "it wasn't all about Cover Oregon. (FYI—no cameras at [Cover Oregon] board meeting and only 2 reporters, that's great progress)."

Records show dozens of emails between Kitzhaber and McCaig on Cover Oregon. During this time, McCaig wasn't billing Kitzhaber's campaign. That enabled Kitzhaber not to disclose her work on his campaign finance reports, as required by law.

McCaig says her work was properly documented. "All of my state-related work is a public record, and my campaign work has been appropriately reported," she says.

In August 2014, WW reported that McCaig was effectively running Kitzhaber's re-election campaign and that Kitzhaber was not reporting her contributions. On Sept. 12,  Kitzhaber emailed McCaig from the Pendleton Round-Up. He joked about that lack of transparency.

"No cheering crowds (but, then again, only one hiss), more horse shit that you can possibly imagine, highly efficient [fundraising] call time," Kitzhaber wrote. "I can pay you now…really.” 

WWeek 2015