One of Tampa Bay's best performing public companies remains haunted by the ghost of a past CEO whose alleged misdeeds just won't disappear.
The phantom is ex-WellCare Health Plans chief Todd Farha, ousted four years ago this month along with two other senior executives. They exited well compensated, just months after a high-profile FBI raid on WellCare's headquarters on Oct. 24, 2007.
The company provides managed care services to Medicaid and Medicare customers across the country.
Fast forward. Shares in WellCare roared up 74 percent last year, making it Tampa Bay's top stock performer among major public companies with headquarters here. No one else in the area even came close in 2011.
WellCare should be celebrating. Instead it's litigating.
On Monday, as current WellCare CEO Alec Cunningham prepared upbeat remarks for an annual J.P. Morgan health care conference, the U.S. Securities and Exchange Commission filed suit in U.S. District Court in Tampa against Farha, former chief financial officer Paul Behrens and former general counsel Thaddeus Bereday.
The SEC's tardy lawsuit — Farha and the other guys really are long gone from Wellcare — alleges insider trading and fraud.
The suit says the three "devised and carried out a fraudulent scheme" to deceive the Florida Agency for Health Care Administration, Florida Healthy Kids Corp., and WellCare investors by "improperly retaining over $40 million in health care premiums" that WellCare was supposed to reimburse to state agencies.
Instead, the suit says the executives used that $40 million to inflate corporate revenue and earnings. Then they sold $91 million in WellCare stock inflated by a market that thought the company was doing better than it was.
There's more to the lawsuit, but you get the drift.
On its own, this round of litigation is compelling. But it's built upon years of other lawsuits — brought by investors and even by WellCare itself — against Farha and his fellow execs.
Before all this, WellCare was politically connected. Its board included former Democratic Sen. Bob Graham as well as Ruben King-Shaw, who was once the No. 2 man at Medicare. WellCare also gave generously to Republican causes, with Farha contributing $100,000 to President George W. Bush's 2004 re-election campaign.
President Bush nominated Farha in 2006 to represent the public interest on the board of the Securities Investor Protection Corp. SIPC works with court-appointed trustees to help investors recover funds when brokerage firms fail.
In hindsight, Farha's SIPC appointment sounds more like a head-shaking plot from a Carl Hiaasen novel. What better person to protect investors from securities fraud?
Since then, Farha has laid low. His last picture in this newspaper in 2010 found him smiling at a Tampa Museum of Art gala. Behrens now calls himself a principal at the area firm Verdant Environmental Services, while Bereday heads a business consulting service called Newport Advisors in Tampa.
Given their abundance of legal woes, it looks like they'll be around to haunt poor WellCare for a good while yet.
Contact Robert Trigaux at [email protected]