WellCare settles with shareholders
By Mike Wells
8/9/2010 © Health News Florida
WellCare Health Plans announced a second-quarter loss but also preliminary settlement of a class-action suit by shareholders with the Securities and Exchange Commission for $200 million.
This proposed settlement does not affect the one still pending with the U.S. Attorney's Office for the Middle District of Florida over civil charges of Medicaid fraud. The company has said previously that it expects to settle that case for about $137.5 million, although a whistleblower in the case has promised to fight for more.
Other news from the company is also a mix of positive and negative. WellCare achieved full accreditation -- an effort that takes years -- from a national association, but also announced restructuring plans that will involve layoffs.
Most of the positions being eliminated are currently unfilled, the company said, so layoffs should affect fewer than 100 employees among a workforce of 3,400.
“We are confident these actions are necessary,” CEO Alex Cunningham said.
The company reported a second quarter 2010 net loss of $128.9 million, or $3.05 per diluted share, compared with the same period last year. The quarter would have showed a small net profit if the company had not had to take charges in preparation for settlements.
WellCare CFO Tom Tran outlined a $200 million dollar proposed settlement to resolve a securities class action complaint. The agreement requires final approval by the U.S. District Court for the Middle District of Florida.
WellCare would pay $52.5 million within 30 days following the court's preliminary approval of the settlement, and $35 million by July 31, 2011, Tran said. The company also will issue $112.5 million in unsecured bonds, with a fixed coupon of 6 percent.
If within three years of the agreement WellCare experiences a change in control at a share price of $30 or more, the company will pay an additional $25 million, Tran said.
This would be the company’s second settlement announced this year. In June, WellCare announced a preliminary settlement worth $137.5 million to resolve pending inquiries with the Civil Division of the United States Department of Justice and the Civil Divisions of the U.S. Attorneys' Offices for the Middle District of Florida and Connecticut.
In May 2009, WellCare paid $80 million to defer criminal prosecution of federal and state probes into allegations that it had defrauded Florida benefits programs for low-income adults and children of $40 million by misstating what it actually spent on care.
After 200 state and federal agents raided its Tampa headquarters in the fall of 2007, WellCare fired its top three executives, restated more than three years of earnings to correct payment errors and blamed the accounting problems on its former executives. They have not been criminally charged.
WellCare provides managed care services exclusively for government-sponsored health care programs, focusing on Medicaid and Medicare. The company served approximately 2.2 million members nationwide as of June 30.