WellCare settles with big investors
WellCare Health Plans is continuing to clean up the mess of a Medicaid fraud scandal, reaching a legal settlement with investors that could have a price-tag as high as $200 million.
A federal judge this week gave preliminary approval to the settlement with five pension funds, which are lead plaintiffs in a case that stemmed from a 2007 raid on the company's Tampa headquarters.
WellCare announced the approval late Thursday afternoon in a Securities and Exchange Commission filing. The company will pay $52.5 million into an escrow account for investors by March 24 --- but it appears that the overall price-tag could climb to about $200 million.
The filing cites an earlier SEC disclosure that indicates WellCare will pay another $35 million by July 31 and also issue bonds to the investors with a value of $112.5 million.
When asked about the terms of the settlement, WellCare spokeswoman Amy Knapp referred Health News Florida to Thursday's filing and said in an e-mail that the filing "should have everything I'm able to discuss.'' A final hearing on the settlement is scheduled May 4.
Investors filed two class-action lawsuits in October and November 2007 --- which were later consolidated into one case --- against WellCare, former company Chairman Todd Farha and former Senior Vice President Paul Behrens, according to an August SEC filing. Later, former General Counsel Thaddeus Bereday was added as a defendant.
The lawsuits, at least in part, contended that the company misstated financial conditions by "purportedly overstating revenue and understating expenses.'' Federal agents raided WellCare's office after a lengthy investigation that included former company financial analyst Sean Hellein wearing a wire to record conversations.
Hellein filed a whistleblower lawsuit that alleges WellCare defrauded the government of as much as $400 million. WellCare and the state and federal governments have reached a tentative $137.5 million settlement in that case --- though Hellein has fought to try to force WellCare to pay more.
Since the 2007 raid, WellCare has been hit with a series of civil and criminal cases and has steadily tried to reach settlements. In 2009, for example, it reached a settlement with the SEC that included a $10 million fine and also agreed to pay $80 million in an agreement that allowed the company to avoid criminal prosecution, according to records on the company website.
WellCare has huge incentives to try to settle the cases. As an example, its business model depends on serving Medicaid and Medicare patients --- a part of the insurance industry that could be poised for substantial growth as states like Florida look to expand the use of managed care to hold down Medicaid costs.
--Capital Bureau Chief Jim Saunders can be reached at 850-228-0963 or by e-mail at email@example.com.