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Robert Trigaux

Ex-WellCare director Herzlinger says she was "advised" to be quiet and collect her $150,000

Reginaherzlingerexwellcaredirector2010harvardbusinessschool Wake up and good morning. Tampa's WellCare Health Plans may well wish it had never poked the sleeping bear that is recently exiled director and audit committee chairwoman Regina Herzlinger. The WellCare director (and Harvard Business School professor), who was not invited to stand for re-election to the company's board, has not gone quietly back to her academic roost. Instead, she has written a couple of stinging and suggestive letters to WellCare (here's the first one, dated April 21, and here's the follow-up on May 5), and was interviewed (here) about the politics allegedly behind her dismissal.

Now comes Wednesday's posting by Herzlinger on the Huffington Post website that starts to get more explicit. Herzlinger writes that she was urged to stay quiet, go away quietly and reap her rewards:

"I was advised that if I quietly sat out the remainder of my term, rather than publicly resigning, nearly $150,000 worth of unvested shares would be mine. Many directors, faced with these circumstances and their exposure to the bottom-feeding bloggers who feed on public disclosures, would accept the advice."

"Bottom-feeding" bloggers? Herzlinger would be whistling into the Internet void with her concerns and allegations without some reporting of her concerns. And beyond this shut-up-get-paid-and-go-away offer she describes, the business professor has plenty of other concerns, as she states in the Huffington Post story. Wellcare, she says, had "the lowest Medicare quality scores and the most fines and sanctions recently among its peers and, as the chair of the audit committee. I knew just how fragile its accounting system was."

She also says she  was "so concerned about the firm's shareholders and enrollees that, instead (of quietly serving out the rest of her term as director), I spent considerable effort gathering information about the firm's worrisome quality and financial issues which I included in my publicly disclosed resignation." Herzlinger adds:

"But wait a second -- why is a public resignation by a fed-up director one of the few ways to publicize information which everyone should have readily available?"

The rest of her Huffington Post story addresses the desperate need for better consumer information, and how H.R. 4803, the bipartisan Rep. Barton-Green-Burgess-Stupak Patients' Right to Know Act and Rep. Steven Kagen 's (D-Wis) complementary bill, if passed, would make this kind of information readily available to all.

"This legislation would force disclosure of which insurance companies and policies provide the most medical-care benefits and best outcomes per dollar, offer the best doctors and hospitals, and hassle sick people and their caretakers the least," Herzlinger argues, concluding:

"If insurers with lackluster scores do not improve, competitors would enter this surprisingly entrepreneurial market."

WellCarefbiraidhendersonroadchriszuppaFrom the start of this public row, WellCare has stated that good corporate-governance practices require it to bring in new board members periodically to provide a fresh perspective. The company said the accounting errors Herzlinger identified in her initial resignation were relatively small and the company's own internal controls identified them, indicating that its processes are working well. The company said the board chose not to renominate her.

Photo, right: FBI agents executed a search warrant, based on claims of Medicare/Medicaid impropriety, at WellCare's Henderson Road campus in Tampa on Oct 24, 2007. (Chris Zuppa, St. Petersburg Times)

Here is the complete Huffington Post story.

So what's the end game here? A major case of sour grapes or will this escalate into a regulatory inquiry or personal legal battle?

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:27am]


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