PUP Owners Want $500M from Accountants

Oct 8, 2014

The majority owners of a now-defunct Medicare Advantage plan say they were duped by the plan’s accountants, the ones they claim are responsible for the company’s collapse, a new federal lawsuit filed in Orlando says.

Dr. Sandeep Bajaj and Dr. Rohini Bajaj claim the national accounting firm McGladrey LLP is responsible for the financial ruin and liquidation of Physicians United Plan Inc., which had served about 50,000 Floridians until the state took over its operations this summer.

The doctors, who practice medicine in Winter Park, are asking the court for a jury trial and $500 million in damages from the Illinois-based accounting firm. 

Dr. Sandeep Bajaj
Credit Florida Accountable Care Services

The strongly worded lawsuit lays out an elaborate accounting scheme of which the owners say they were unaware. It claims that starting in 2010, McGladrey manipulated the accounting and audit reports surrounding a “sale leaseback” deal designed to solidify the company’s finances and help boost its rapidly growing membership.

The accounting firm and Pac West Financing, which set up the sale leaseback, misled Physicians United plan members, the owners and the Florida Department of Insurance Regulation, the lawsuit said.

In general terms, the scheme reclassified uncollectible account receivables as cash assets in monthly financial reports to the state, said the claim filed by Tampa attorney Daniel Nicholas.

“The purposes for this accounting chicanery, rather sadly if not pathetic, was to mislead FOIR that PUP had admitted assets that should be counted as capital and surplus to satisfy solvency requirements of the Florida Insurance Code, to create a deceptive illusion that PUP could increase membership to whatever levels it required,” reads the complaint filed last week in Florida’s Middle District Court in Orlando.

Other companies mentioned in this lawsuit likely will be named in new complaints to be filed in the coming weeks, the Nicholas law firm said. Former plan members are not a named party in the lawsuit.

Terri Andrews, spokesperson for McGladrey, said Tuesday night that the company does not comment on pending litigation. According to its corporate website, McGladrey provides assurance, tax and consulting services in 75 U.S. cities, including seven offices in Florida.

Physicians United Plan, based in Orlando, began selling Medicare Advantage plans in 2005. The fast-growing plan was more than $13 million in debt when the state’s Department of Financial Services took over operation early June. The nearly 50,000 seniors with plans were shifted to other plans or provided traditional Medicare coverage.

The claim involving McGladrey was not the first time Physicians United had been in financial trouble. The lawsuit acknowledges that in 2007, the company’s capital and surplus was in the negative. Both of the owners invested additional capital and corrected the problem at that point, it said.  State reviews also found shortfalls in 2009.

Health News Florida is part of WUSF Public Media. Contact Editor Mary Shedden at (813) 974-8636, on Twitter @MaryShedden, or email at shedden@wusf.org. For more health news, visit HealthNewsFlorida.org.