WellCare director who resigned in accounting protest says she's not done with company
Wake up and good morning. It's not much of a stretch to say that when a company's director, who happens to chair the critically important audit committee and also serves as a tenured Harvard Business School professor, resigns in protest raising accounting concerns, red flags start waving.
Such is the case of Regina Herzlinger, who served on the board of Tampa's WellCare Health Plans and stepped down last month after raising questions about accounting practices at the Medicare and Medicaid company. Here is the April 23 Venture posting on that event. WellCare disputes and downplays Herzlinger's concerns and departure, saying it wants new blood on its board.
Now Herzlinger says she's not done. In a May 3 story published by footnoted.org, a Morningstar-owned Web site dedicated to searching for news and insights in Securities and Exchange Commission and related filings of public corporations, Herzingler tells reporter Theo Francis that she's planning a response to the one Wellcare published about Herzlinger's claims in its 8-K filing. Stated footnoted.org:
"Key to Herzlinger’s concerns, she told us, is the looming need for WellCare and other health insurers to integrate accounting and health-record systems, to convince regulators that federal funds are going to care rather than administrative expenses or inefficiency. 'Increasingly, health insurance firms that deal with Medicaid and Medicare are going to be paid for performance,' she said, 'which really means the accounting system has to be coupled with the clinical system.'"
WellCare's accounting woes, including an FBI raid and hefty fines, are well documented. And WellCare, in its response to Herzlinger’s resignation letter, argues that the company itself discovered and dealt with its accounting problems, and that her other accounting concerns were immaterial.
WellCare spokesperson Amy Knapp did respond to footnoted.org's request for comment:
"Dr. Herzlinger became aware of these issues only as a result of their being reported to her, as chair of the audit committee, by the company’s chief financial officer and chief internal auditor. The company and board take Dr. Herzlinger’s assertions very seriously and the board has concluded a comprehensive and appropriate review."
"The internal auditor caught them, which is great," Herzlinger said in response to footnoted.org. "What’s not so great is they keep having these accounting problems."
Ultimately, Herzlinger tells footnoted.org, she decided to resign and make her concerns public because she worried that "retiring quietly would mean the company never faced up to the risks she saw." The resignation as a director also came at a financial cost -- forfeiting over $100,000 in equity grants, she estimates. Read the entire footnoted.org story here.
Is this a director's tiff likely to blow over in time, or does Herzlinger's pending response to WellCare's 8-K feed the flames at a company long embroiled in accounting mishap?
One landmark hurdle takes place tomorrow, Wednesday, May 5, when WellCare holds its quarterly earnings conference call.
-- Robert Trigaux, Times Business Columnist