WellCare resolves to go after former executives following Medicaid fraud scandal

An internal report advises legal action against the former CEO, CFO and general counsel, although there is no evidence they knew of the fraud.

By Emily Berry — Posted Dec. 31, 2009

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Tampa, Fla.-based managed care plan WellCare intends to file lawsuits against its former top executives, according to a filing in federal court as part of a shareholder lawsuit against the company.

WellCare's former chair, president and chief executive officer Todd Farha, former chief financial officer Paul Behrens and former general counsel Thaddeus Bereday all resigned in January 2008 after revelations that the company was under investigation by state and federal regulators.

The company was accused of improperly keeping about $40 million in Medicaid payments it should have refunded to Florida.

In May, the company agreed to pay $40 million in restitution and a $40 million forfeiture to the U.S. attorney general's office and in a separate agreement with the Securities and Exchange Commission, agreed to pay a $10 million fine. Both settlements barred the company from publicly disputing the agencies' findings of fraud.

WellCare's board of directors formed an internal "special litigation committee" to look into the allegations of Medicaid fraud. The committee was made up of one person, director David Gallitano, who was appointed to the board in May.

He filed his final report Nov. 20 as part of a federal shareholder class action suit against the company.

The report states that WellCare should pursue Farha, Bereday and Behrens "for breaches of their contractual and fiduciary duties to the Company," and said, "based on its findings, the [committee] will pursue such claims in an amended complaint or cross-claim in one of the pending federal actions."

Gallitano's report also concluded that there is no evidence that former officers named in the shareholder lawsuit "knew or should have known" about the fraud.

Attorneys for Bereday and Farha declined to comment. Behrens' attorney did not respond to a request for comment.

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