WellCare spokeswoman Amy Knapp would say only that the firm is looking forward to resolving the False Claims Act lawsuit with federal investigators and attorneys general in Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Missouri, New York and Ohio.
“After careful assessment of the factual allegations and legal claims, the federal and relevant state governments concluded that the settlement amount is appropriate, and we agree,” Knapp said. “The events at issue occurred well over three years ago, and since then, WellCare has been transformed.”
WellCare, a publicly traded contractor that manages state Medicaid programs, was accused of numerous illegal accounting activities, such as inflating claims in order to meet state-mandated medical-loss ratios and overpaying a reinsurance captive in the Cayman Islands as a way to conceal profits.
Since 2006, when the allegations first came to light, WellCare has entered a deferred prosecution agreement with state and federal prosecutors that included an $80 million fine, as well as a $10 million settlement with the Securities and Exchange Commission. On May 4, the company also received final approval to settle a class-action lawsuit that will pay shareholders a total of $88 million in cash and $113 million in stock.
Those settlements and the proposed whistle-blower payments would put WellCare's total legal payouts at more than $428 million in cash and stock. Separately, WellCare has sued three former executives who are accused of mismanaging the company until 2007, though that litigation was put on indefinite hold in March after the executives—former CEO Todd Farha, former general counsel Thaddeus Bereday, and former chief financial officer Paul Behrens—were indicted criminally by a federal grand jury in Florida.
“The criminal trial will result in a developed factual record that will provide the parties with substantial evidence that may be able to be utilized in this case,” attorneys for both WellCare and the executives wrote in their joint motion for a stay in the lawsuit pending the outcome of the criminal case. In a May 6 earnings report, WellCare said it booked net income of $21.6 million in the quarter ended March 31, compared with $6.4 million in the same quarter a year ago.