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WellCare Health Plans, Inc. (NYSE:WCG) announcement of settlement.

6/28/2010 2:52:20 PM

June 28, 2010

 

Cohen, Foster & Romine

201 E. Kennedy Blvd, Suite 1000

Tampa, FL

 

813 225-1655

 

Barry Cohen of Cohen, Foster & Romine makes the following statement:

 

Our firm received a call from the press today concerning WellCare Health Plans, Inc. (NYSE:WCG) announcement of a settlement of a False Claims Act case filed by our firm.  Analysts are already accepting the settlement as a done deal, asserting that the $137M settlement is easily covered by WellCare’s current cash position and raising their outlook for the Company’s future and its stock price.  This statement is designed to provide clarity and fair disclosure about this matter.

 

Our firm has on file a 20 Count False Claims Act complaint against WellCare in Case No.: 8:06-CV-01079-T-30TGW.  This case was filed on June 7th, 2006.  A False Claims Act case is a case where an individual called a “relator” sues on behalf of the state and federal governments to recover on false claims or submissions made by an entity.

 

The Federal Statutes governing False Claims brought by relators allows for treble damages and additional financial penalties to deter such wrongful behavior and protect the American taxpayer.  Our pleading seeks to recover $400 to $600M in actual damages and over a billion dollars in treble damages and penalties. 

 

Our relator/client worked with the Justice Department  as part of an undercover operation for over 18 months, surreptitiously capturing hundreds of incriminating admissions of the Company's fraudulent, insensitive and arrogant practices at the expense of the economically weak by an economically strong corporation.  As our recently unsealed complaint details, sadly, the criminality permeated from the top of the corporation throughout much of its ranks.

 

These admissions were captured through high-tech audio and video technology provided by the government.  This surveillance, of over 1,000 hours, supports the claims made in detail in our complaint.

 

In addition, as a consequence of the evidence of criminal and fraudulent activity obtained by our client, WellCare, faced with a criminal indictment, chose to enter into a Deferred Prosecution Agreement to avoid conviction, admitted much of the criminal and fraudulent conduct alleged in only 4 counts out of 20 contained in our complaint, and agreed to pay $80M in reparations.  Despite this, only one employee, in more than four years of investigation, has been indicted.  This is the case, despite the Department of Justice’s announcement that additional indictments were to be returned in January 2010; none have yet been returned which we find enigmatic. 

 

In our opinion, the merit of our complaint has been validated not only by the fact that the Department of Justice has elected to intervene in all of our claims against WellCare but also by the fact that WellCare did not contest or oppose the criminal allegations that resulted from our client’s efforts. 

 

Last on June 24, WellCare attempted to mitigate the effect of a predictable unsealing of our complaint by announcing a "preliminary settlement" of our client’s claims.  However, it should be noted that we were advised by the Department of Justice lawyers yesterday that this settlement has not be approved by senior Justice Department officials and in all likelihood once the Attorney General becomes conversant with all the salient facts, it is our belief that he will not permit the taxpayers to be unfairly disadvantaged by a settlement that pays less than half of what our pleadings suggest was stolen to say nothing of the requirement of triple damages under the False Claims Act.

 

In addition, WellCare's public statement failed to disclose that our client has not accepted the proposed WellCare settlement of $137M, which we have made clear to the government is grossly inadequate.

 

In our complaint, we have estimated that these damages are between $400 and $600M.  In our opinion, these ill-gotten gains were taken by deceiving, outsmarting and concealing the truth from government regulators, with WellCare being comfortable that it would never be discovered, but if it were, they were confident that they could control the problem through their well developed “contacts.”    

 

The public statement also fails to advise shareholders and the public that as a result of our client's objection there will likely have to be a public fairness hearing to determine if the proposed “preliminary settlement” is fair, reasonable and adequate. 

 

WellCare's statement also fails to point out that if the matter proceeds to litigation the damages proven could be trebled and additional financial penalties assessed making the total potential judgment against WellCare that might be obtained to exceed over one billion dollars.

 

Our client took substantial risks to benefit the American taxpayer and see that justice is done.  Of course, there are financial benefits, but more important is to deter any effort by companies such as WellCare to take advantage of the health care system or the people who should be served by this system.  We intend to ensure that WellCare understands that it is our view that crime should not pay despite the Department of Justice’s view evidenced by its preliminary agreement that WellCare touts in its June 24 SEC filing.

 

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