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Former WellCare executives convicted in Medicaid fraud case

TAMPA — On a morning in 2007, law enforcement agents burst into the headquarters of WellCare, seizing computers and documents in a massive fraud investigation.

On Monday, a federal jury delivered the 6-year-old case's most high-profile development: criminal convictions against the men who once led the managed health care company.

The men were acquitted of other charges, and the jury deadlocked on still others. But experts said the convictions in the case, which drew national interest, are significant, coming at a time of growing scrutiny of health care fraud.

The jury found former chief executive officer Todd S. Farha, former chief financial officer Paul L. Behrens and former vice president William Kale guilty of two counts of health care fraud for submitting false expenditure reports to the state Medicaid program. The jury also found Behrens guilty of two other charges of making false statements related to health care matters.

A fourth defendant, former vice president Peter E. Clay, was found guilty of making false statements to federal agents.

On each of the health care fraud counts, Farha, Behrens and Kale face up to 10 years in prison. The other charges carry a maximum of five years. The men have 30 days to file post-trial motions; then comes sentencing.

"Today's guilty verdicts send a clear message that health care fraud will not be tolerated in the Middle District of Florida," U.S. Attorney Robert O'Neill said in a statement. "The greed of those who siphon funds from individuals dependent upon federal health care programs must be investigated and prosecuted to the full extent of the law."

The defendants and their lawyers declined to comment.

The jury delivered the verdicts after nearly three weeks of deliberations, plus a highly unusual weeklong break.

Jurors found Farha not guilty of six other charges, Behrens not guilty of two charges, Kale not guilty of four charges and Clay not guilty of two charges. U.S. District Judge James S. Moody Jr. declared a mistrial on a host of other charges against the four men after the jury failed to reach verdicts on those counts.

Still, experts say, the outcome makes a statement at a time when the government is cracking down on health care fraud.

Federal prosecutors accused the former executives of defrauding the Medicaid program for the poor of nearly $30 million. They say WellCare took Medicaid money from Florida's Agency for Health Care Administration with the understanding that if it did not use 80 percent of the funds set aside for behavioral health services, the difference was to be returned to the state.

But, prosecutors say, executives conspired to inflate reports of what they actually spent to reduce the amount they had to return.

Defense attorneys say the expenses were legitimate and that the state knew about the arrangement but failed to give WellCare and other HMOs any guidance. They say federal prosecutors turned a contractual dispute into a federal crime.

Michael E. Clark, a Philadelphia lawyer who serves as vice chairman of the American Bar Association's health law section, said the Obama administration has made fighting health care fraud a priority. Company executives, rather than low-level employees, are smart targets, he said.

"You always want to use your limited resources to get the biggest bang for your buck," he said.

The trial, which began in late February, has been closely watched around the country, particularly for its implications on new federal requirements governing how much insurers must spend on services.

"It's not only a big deal for the Medicaid market, but this obviously is a notable false claims issue in relation to the individual and group markets under health reform," said Sara Rosenbaum, a law professor at George Washington University.

WellCare — which is under new leadership — has its own pending litigation against the former executives, said spokesman Jack Maurer. He called today's WellCare a "transformed company" that cooperated with authorities.

"WellCare believes that these executives and their actions did not and do not reflect the hard work, dedication and ethics of WellCare's employees and managers — both then and now," Maurer said in a statement.

In 2009, the company paid $80 million to settle corporate fraud charges and reached a civil settlement with the Department of Justice for $137 million in 2010.

The prosecutors' case against the executives included hours of internal meetings secretly taped by whistle-blower Sean Hellein, who got nearly $21 million as part of the federal civil settlement with WellCare.

Hellein, who was never called to testify, could not be reached Monday, but his lawyer, Barry Cohen, said he wasn't surprised the case resulted in convictions.

"WellCare didn't pay us … for the hell of it," said Cohen.

Times researcher Natalie Watson contributed to this report. Jodie Tillman can be reached at [email protected] or (813) 226-3374.

What happened

Former WellCare executives on Monday were convicted of criminal charges that they conspired to keep funds for the health care of poor people that should have been refunded to the state. In 2009, the company paid an $80 million civil settlement over fraud charges, much of which went to a whistle-blower.


Oct. 24, 2007: Federal and state agents raid WellCare Health Plans of Tampa, seizing computers and files.

Jan. 25, 2008: Todd Farha, chairman, chief executive and president; Paul Behrens, chief financial officer; and Thaddeus Bereday, general counsel, are ousted from leadership.

Aug. 18, 2008: In a regulatory filing, WellCare says it will pay $35.2 million as part of an agreement with U.S. prosecutors in a Medicaid fraud investigation. The payment doesn't settle the case or limit further claims.

March 7, 2009: WellCare stops enrolling new customers after notification of sanctions from the U.S. Centers for Medicare & Medicaid Services.

May 5, 2009: WellCare agrees to pay $80 million to settle a charge of conspiracy to defraud the Florida Medicaid program and Florida Healthy Kids Corp.

Jan. 9, 2012: The SEC files suit in U.S. District Court against Farha, Behrens and Bereday, alleging insider trading and fraud.

April 3, 2012: U.S. Attorney Robert O'Neill announces the settlement of four lawsuits initiated by whistle-blowers, including Sean Hellein, who gets nearly $21 million. Clark Bolton, SF United Partners and Eugene Gonzalez split at least $4.66 million.

Feb. 26: Criminal trial of former WellCare executives begins.

Former WellCare executives convicted in Medicaid fraud case 06/10/13 [Last modified: Monday, June 10, 2013 11:36pm]
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