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Medicaid fraud trial starts for former WellCare executives

The October 2007 raid by federal agents on WellCare headquarters in Tampa came up on the first day of trial.

CHRIS ZUPPA | Times (2007)

The October 2007 raid by federal agents on WellCare headquarters in Tampa came up on the first day of trial.

TAMPA — Four former WellCare executives accused of defrauding the Medicaid program of more than $30 million put up their first courtroom defense Tuesday. Far from breaking the law, they argued, they did their best to cope with a lack of guidance from state bureaucrats.

Lawyers for the former executives at the Tampa-based health care plan company blamed Florida's Agency for Health Care Administration for misreading state law, failing to specify what it wanted on WellCare's expense reports and even concealing information on how it calculated what the firm was paid to handle care for Medicaid recipients.

With government agencies, defense lawyer John Lauro told the jury in federal district court in Tampa, "Sometimes you just don't get a straight answer."

But federal prosecutors had a simpler version: Under the leadership of "greedy" executives, WellCare concocted an "elaborate scheme" to defraud the government of funds that should have gone back to the state to care for poor children and families.

"They cooked the books," said Assistant U.S. Attorney Cherie Krigsman.

Tuesday was the first day of what is expected to be the months-long trial of former chief executive officer Todd S. Farha; former chief financial officer Paul L. Behrens; former vice president William Kale; and former vice president Peter E. Clay.

Former general counsel Thaddeus Bereday was also indicted, but because of a medical condition will be tried separately.

Each man is charged with one count of conspiracy to commit health care fraud, four counts of health care fraud and of making false statements relating to health care matters. Clay also faces two counts of making false statements to federal agents. The men face up to 10 years in prison for each health care fraud count, and up to five years for the other charges.

Their former employer already has paid $137.5 million to settle civil fraud claims and is seeking to distance itself from the past at a time when Florida is poised to vastly increase business for Medicaid managed care companies. The trial of WellCare's former executives also comes as federal authorities are cracking down on health care fraud at all levels.

On Tuesday, the defense and the prosecution used charts and answered such basic questions as "What is Medicaid?" to ease jurors into the complicated world of privately run Medicaid programs.

Krigsman told jurors that in 2002, a year before the alleged fraud began, the Florida Legislature had passed a law pertaining to behavioral health services for Medicaid recipients. It requires Medicaid managed care companies to spend 80 percent of the premiums they get from the state on services; spend less and the difference goes back to the state.

Krigsman said WellCare officials determined they stood to return $4.8 million a year. So, she said, they came up with a plan to inflate costs and reduce what they owed the state.

They even created another company, later called Harmony, which WellCare's two Florida HMOs paid for behavioral services, Krigsman said. Prosecutors will show that the executives would decide how they wanted to refund the government — from nothing to $1.5 million — and manipulate the numbers to hit that target, she said.

Defense lawyers argued, however, that Florida Medicaid officials knew about Harmony and didn't object. They also said WellCare was not inflating the costs, which went up in part to compensate Harmony's case managers who coordinated the care.

"Providing that care is not fraud," said Lauro, who represents Behrens. "It's the right thing to do."

The federal investigation into WellCare was prompted by a whistle-blower complaint, and defense lawyers indicated Tuesday they plan to go after that former employee, Sean Hellein.

Hellein, who was represented by prominent Tampa attorney Barry Cohen, got nearly $21 million for telling the government about the alleged abuses.

"He often joked that one day WellCare would show him the money," said Lauro, moments after displaying a photograph showing Hellein with an expensive-looking watch in his hand.

WellCare remains one of the state's largest Medicaid operators, and the company's leadership was quick this week to release a statement disavowing its former leaders, who left the firm in 2008. "The trials are completely separate from who WellCare is today, how we run our business and our focus on providing quality care to our members," said Jack Maurer, vice president of corporate communications.

If Tuesday was any indication, not even the smallest detail will be spared from debate.

Lauro opened by telling the jury about the day in October 2007 when federal agents raided WellCare headquarters. "The sun rises," he began, describing a clear morning, "the kind of day that makes us all happy to be in Florida."

Prosecutor Krigsman later called her first witness, FBI Special Agent Eduardo Ortega, who was involved in the raid on WellCare. Krigsman asked him if it was a sunny morning.

"No ma'am," responded Ortega. "It was rainy."

Times researcher Carolyn Edds contributed to this report. Jodie Tillman can be reached at or (813) 226-3374.

Timeline of fraud case

Oct. 24, 2007

Federal and state agents raid WellCare Health Plans of Tampa, seizing computers and files.

Jan. 25, 2008

Todd Farha, former 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

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 settlement of all four lawsuits initiated by whistle-blowers, including Sean Hellein, who will get nearly $21 million. Clark Bolton, SF United Partners and Eugene Gonzalez will split at least $4.66 million.

Feb. 26, 2013

Criminal trial of former WellCare executives begins.

Source: Tampa Bay Times archives

Medicaid fraud trial starts for former WellCare executives 02/26/13 [Last modified: Wednesday, February 27, 2013 8:40am]
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