Ex-WellCare CEO Farha Gets Break

May 20, 2014

Todd Farha, former CEO of WellCare Health Plans, drew a three-year sentence for Medicaid fraud Monday, far below the sentencing guidelines. The judge said Farha has already suffered the loss of his reputation and career and that he is unlikely to repeat his "mistake."

Other former WellCare executives also drew sentences lighter than the guidelines:   former CFO Paul Behrens, two years; William Kale, who led the subsidiary where the fraud took place, one year and one day; and Peter Clay, a former vice president, who received probation.

Former CEO Todd Farha in better days.
Credit WellCare Health Plans

As the Tampa Tribune reports, Farha, 45, stood in front of a packed courtroom and told the court: “I just want to let you know how sorry I am and how much shame I feel about this case.

“I never imagined I would be before you,” he said, according to the Tribune. “I’ve worked hard my whole life trying to do the right thing. I realize I made serious mistakes.”

Had U.S. District Judge James Moody followed the pre-sentence report, Farha would have been sent to prison for at least 10 years; Behrens would have drawn nine years and Kale, 6 1/2.

The Tribune reported that Moody called the scheme “a complete aberration of the lives and careers of these defendants. They made a mistake and it was a costly one."

The Tampa Bay Times quoted the judge as saying: "No sentences could punish them more than they've already been punished."

The Times also quoted Barry Boss, an attorney for Farha: "We are grateful that Judge Moody, in imposing a sentence substantially below what the government sought, recognized the complex circumstances of this case and the true character of the people involved."

Farha, Behrens and Kale were convicted by a federal jury in June 2013 on charges of health fraud; the jury deadlocked on some other charges. General Counsel Thaddeus Bereday, who was indicted with the others, was severed from the trial on account of health problems.

“They have been punished in the community and this has been a blow to their reputations, who they were as individuals,” Moody said. “They will never be able to re-establish their careers.”

He allowed the men to remain free while they decide whether to appeal. Moody also fined Farha $50,000.

Tampa-based WellCare, which specializes in Medicare and Medicaid rather than commercial accounts, feels less sympathy for Farha et al. Last month, WellCare filed forms saying they should have to pay the company $365 million in restitution: $134 million for their compensation, and the rest to pay WellCare back for what it took to clear its name.

WellCare settled criminal charges in 2009 by agreeing to pay the federal government and states it defrauded -- mainly Florida -- a total of $80 million. In 2011, it agreed to settle a class-action suit by shareholders with a payment of $200 million.

In 2012, after the whistleblower signed on to the agreement, WellCare settled civil fraud charges with the government of $137.5 million, as Health News Florida reported.

According to evidence presented at the trial, Farha and others orchestrated a scheme to defraud the Florida Medicaid program from the summer of 2003 through the fall of 2007 by lying to the Florida Agency for Health Care Administration about how much it was spending on members' treatment for mental illness and addictions.

A 2002 Florida law required that Medicaid HMO contractors spend at least 80 percent of the funds they received for those items on direct services to members, and no more than 20 percent on administration and profits.  Operating through its then-subsidiary Harmony Behavioral Health, WellCare created false statements for AHCA that made it appear spending on members was greater than it actually was.

This inflated profits, which sent the stock soaring. The executives who carried out the fraud made money from stock options, which was part of their compensation.

Shares of WellCare dropped when the FBI and other law enforcement agencies raided the headquarters in October 2008, hauling away computers and boxes of documents.