business

WellCare to pursue legal action against former executives

The Florida-based Medicare and Medicaid contractor is now a plaintiff alongside shareholders seeking damages for alleged fraud.

By Emily Berry — Posted July 27, 2010

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WellCare has moved from defendant to plaintiff in a legal complaint brought by shareholders over alleged multimillion-dollar fraud by the health plan's former executives.

A U.S. District Court judge in Tampa, Fla., July 7 approved the company's partial settlement with shareholders seeking redress for damage they claim was done to the company through former executives' allegedly seeking to enrich themselves, engaging in "unsound business practices" and inflating the company's financial results.

The court dismissed all claims against current executives and directors. It also allowed the company to pay the plaintiffs' $1.7 million legal fees and to join the plaintiffs in pursuing the former executives as the case proceeds.

The decision was the latest in a line of settlement agreements in various jurisdictions for the Tampa-based insurer, which administers Medicare and Medicaid benefits.

The company may now seek damages from former Chair, President and Chief Executive Officer Todd Farha, former Chief Financial Officer Paul Behrens and former General Counsel Thaddeus Bereday. All three resigned in January 2008 after the company came under investigation for allegedly cheating Medicaid programs.

"This is another in a series of company efforts over the past 2½ years to remediate past practices and forge a new future for members, associates and stockholders," current WellCare Chief Executive Officer Alec Cunningham said in a statement.

Attorneys for the three former executives declined comment.

In June, WellCare released details of a tentative $137.5 million settlement with state and federal authorities prosecuting a whistle-blower complaint against WellCare under the False Claims Act. WellCare did not officially admit any wrongdoing. It also agreed to pay back $23 million to the Florida Agency for Healthcare Administration for money it overcharged the state for administering Medicaid benefits from August to October 2005. In that case, the company admitted it was overpaid, but it said changes in payment methodology were responsible for the problem.

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