Former WellCare CEO Todd Farha and two other top executives were charged with fraud and insider trading by the Securities and Exchange Commission on Thursday. Hardly a surprise, given that they already face criminal charges.
But what may shock some is the extent of personal profit for the three executives from their alleged ripoff of Florida Medicaid and Healthy Kids, described in the 56-page filing in U.S. District Court in Tampa.
The three -- Farha, former CFO Paul Behrens and General Counsel Thaddeus Bereday -- pocketed $91 million by selling artifically-inflated company stock, the suit says.
They sent the price of the stock up to artificial heights by filing reports indicating the company was immensely profitable, the suit says. But the profits were an illusion created by the theft of at least $40 million from Florida taxpayers, it says.
The SEC asks the court to make the three "disgorge their ill-gotten gains" with interest and impose other penalties for violating securities laws. It also seeks to bar them from ever again being an officer or director of a public company.
Farha, Behrens and Bereday resigned four years ago under pressure following a raid by FBI and state law enforcement officials at the Tampa headquarters of the managed-care company. Since then, WellCare has been dealing with the fallout legally, even while seeing its stock price soar.
The three and their attorneys have turned down reporters' attempts to contact them; their criminal trial is now scheduled for January 2013. Tampa Bay Times business columnist Robert Trigaux writes in a column published today that all three appear to still be based in Tampa.
Trigaux says Farha has been seen at the Tampa Museum of Art; Behrens is listed as a principal at Verdant Environmental Services and Bereday heads a business consulting service, Newport Advisors.
The SEC filing said Farha sold 1.1 million WellCare shares for $57.3 million. Behrens and Bereday each had around 280,000 shares; Behrens received $15.8 million for his, and Bereday took in $17.8 million.
Investors’ class-action suit against WellCare, settled for $200 million in May, resolved private claims against Farha, Behrens and Bereday, Thomson Reuters reported this week. They didn’t have to pay out of pocket; their directors’ and officers’ insurance covered it, according to that article.
WellCare settled its criminal case with the Florida Attorney General’s Office and the U.S. Attorney’s Office in Tampa two years ago, agreeing to pay $80 million. Negotiations in the civil whistleblower case, joined by the Department of Justice, are ongoing.
