Make us your home page
Instagram

WellCare to go after its former top executives for misconduct

Nearly two years after being forced out following an FBI raid, the former top executives of Tampa's WellCare Health Plans Inc. can expect to be charged with misconduct by the company they once led.

In a federal court filing, WellCare said it will pursue claims against former president and chief executive Todd Farha, chief financial officer Paul Behrens and general counsel Thaddeus Bereday "for breaches of their contractual and fiduciary duties."

The corporate decision to hold its ousted officials responsible for WellCare's downfall comes as the managed care company tries to recover from ongoing state and federal investigations. The company paid $80 million in May to settle charges that it had cheated Florida's Medicaid program.

Now, according to a filing in late November in a shareholder lawsuit, WellCare said it intends to go after Farha, Behrens and Bereday based on findings of an internal investigation.

After interviewing 31 people and reviewing more than 600,000 documents, the investigator concluded that WellCare's seven non-employee directors had no knowledge of any wrongdoing. Those directors include former U.S. Sen. Bob Graham and Ruben King-Shaw, once head of Florida's Medicaid agency.

But the investigation came to a different decision regarding Farha, Bereday and Behrens, who declined to be interviewed by the company. The report did not specify the timing or details of the allegations. A spokeswoman for WellCare said, "It is not appropriate for us to comment further on matters currently under review or pending litigation."

In responses to other lawsuits claiming the men had a role in WellCare's accounting scandal, Farha, Bereday and Behrens have denied wrongdoing.

WellCare, which runs private Medicare and Medicaid plans, skyrocketed to $4 billion in sales in 2006 under Farha's leadership. But after federal officials converged on its Tampa headquarters in October 2007, the company's stock plummeted from $122 to $42 a share.

In January 2008, Farha, Behrens and Bereday were forced to resign. Under terms of their departures, Farha was divested of more than $10 million in stock awards. Behrens and Bereday also forfeited hundreds of thousands of dollars in salary they would have been paid under other circumstances.

The government's investigation focused on WellCare's fraudulent accounting practices, which allowed it to retain excess payments it received from Florida's Medicaid and Healthy Kids programs. Both plans require insurers to spend at least 80 percent of the money they receive from the state on mental health services or refund the difference. In the settlement last May, WellCare acknowledged it had kept about $40 million to which it was not entitled.

"WellCare, acting through its former officers and employees, would and did falsely and fraudulently inflate medical expenditure information," the settlement said.

In May, WellCare also paid $10 million to settle a lawsuit from the Securities and Exchange Commission. WellCare had to restate several years of income downward as a result of the fraud. In the restatement, the company said, "Former senior management set an inappropriate tone in connection with efforts to comply with the regulatory requirements."

While WellCare did not disclose its allegations against Farha, Behrens and Bereday, a complaint in another shareholder lawsuit claims that two former employees say orders to cheat came from the top. In the case of Eastwood Enterprises against WellCare and its former executives, the plaintiffs allege the director of strategic planning said Farha directed him to "push funds offshore." The former vice president of actuarial services said he resigned rather than follow Behrens' orders to falsify expense records. Both men denied the allegations.

In the past few years there have been a few high-profile cases of troubled companies going after former executives. In June, a judge in Alabama ordered former HealthSouth chief executive Richard Scrushy to pay nearly $2.9 billion for a massive accounting fraud.

Charles Elson, an expert on corporate governance who is a member of HealthSouth's board, declined to comment on Scrushy's case but said similar cases are usually settled out of court.

"Companies will sue because there may be money to recover or a point to be made," said Elson, a professor at the University of Delaware. "Whether or not they're successful, it sends a message that the board takes these kinds of actions seriously."

Kris Hundley can be reached at khundley@sptimes.com or (727)892-2996.

WellCare to go after its former top executives for misconduct 12/04/09 [Last modified: Friday, December 4, 2009 11:07pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Bigger ships carry Georgia ports to record cargo volumes

    Economic Development

    SAVANNAH, Ga. — Bigger ships arriving through an expanded Panama Canal pushed cargo volumes at Georgia's seaports to record levels in fiscal 2017, the Georgia Ports Authority announced Monday.

    The Port of Savannah moved a record 3.85 million container units in fiscal 2017, the state said, benefiting from the larger ships that can now pass through an expanded Panama Canal.
  2. Dragon ride in Harry Potter section of Universal closing for new themed ride

    Florida

    Universal Orlando announced Monday that it will close Dragon Challenge for a new "highly themed" Harry Potter ride to open in 2019 — sending wizard fans into a guessing game with hopes for a Floo Powder Network or the maze from the Triwizard Tournament.

    Universal Orlando announced Monday that it will close Dragon Challenge on Sept. 5 for a new "highly themed" Harry Potter ride to open in 2019. The ride, originally the Dueling Dragons roller coaster, was renamed and incorporated into the Wizarding World of Harry Potter when the hugely popular area opened in 2010.
  3. Would you let your company implant a chip in you?

    Working Life

    Would you ask an employee to get a chip implanted in her hand? Sounds invasive and intrusive. But come Aug. 1, one company in Wisconsin will be giving it a try.

    Three Square Market - a developer of software used in vending machines - is offering all of its employees the option to get a microchip implanted between the thumb and forefinger. [Photo from video]
  4. Daniel Lipton resigns as artistic director of Opera Tampa

    Stage

    TAMPA — Daniel Lipton has resigned as artistic director of Opera Tampa, the David A. Straz Jr. Center for the Performing Arts announced.

    Daniel Lipton became the artistic director and conductor of Opera Tampa in 2012. Lipton replaced the opera's only previous director, Anton Coppola, who retired. [Times file (2012)]
  5. Throwback Tampa Bay station 102.9 goes from R&B jams to WFLA-AM's conservative talk

    Blogs

    Talk radio station WFLA-AM (970) began simulcasting on 102.9 FM in the Tampa area this morning. 

    Tampa's 102.9 is going from Throwback Tampa Bay to WFLA-AM's news radio.