Set­tle­ment hold­out

Whis­tle-blower in Well­Care case re­fuses deal

Modern Healthcare - - The Week In Healthcare - Joe Carl­son

Fed­eral lit­i­ga­tors, at­tor­neys with nine state gov­ern­ments and three cor­po­rate whis­tle-blow­ers have all agreed to ac­cept a $137 mil­lion legal set­tle­ment with Florida’s Well­Care Health Plans over al­le­ga­tions of per­va­sive Med­i­caid fraud.

A fourth whis­tle-blower, how­ever, re­fused to sign off on the nine-fig­ure set­tle­ment be­cause he be­lieves it to be too low, which may tor­pedo the deal.

“We think they stole at least $400 mil­lion to $600 mil­lion, and they’re pay­ing back $137 mil­lion,” said at­tor­ney Barry Co­hen, of Tampa, Fla., who rep­re­sents the hold­out whis­tle-blower, Sean Hellein. “I think that there’s some­thing wrong with the sys­tem when you can com­mit a crime like this, and then you can say, ‘I spent all the money and I don’t have the abil­ity to pay you back.’ ”

Hellein’s re­sis­tance will force a fair­ness hear­ing in U.S. District Court, where a fed­eral judge will hear ev­i­dence and then de­ter­mine whether the set­tle­ment is ap­pro­pri­ate. An an­swer in the neg­a­tive could scut­tle the deal, Co­hen said.

Well­Care spokes­woman Amy Knapp would say only that the firm is look­ing for­ward to re­solv­ing the False Claims Act law­suit with fed­eral in­ves­ti­ga­tors and at­tor­neys gen­eral in Connecticut, Florida, Ge­or­gia, Hawaii, Illi­nois, In­di­ana, Mis­souri, New York and Ohio.

“Af­ter care­ful as­sess­ment of the fac­tual al­le­ga­tions and legal claims, the fed­eral and rel­e­vant state gov­ern­ments con­cluded that the set­tle­ment amount is ap­pro­pri­ate, and we agree,” Knapp said. “The events at is­sue over­pay­ing a rein­sur­ance cap­tive in the Cay­man Is­lands as a way to con­ceal prof­its.

Since 2006, when the al­le­ga­tions first came to light, Well­Care has en­tered a de­ferred pros­e­cu­tion agree­ment with state and fed­eral pros­e­cu­tors that in­cluded an $80 mil­lion fine, as well as a $10 mil­lion set­tle­ment with the Se­cu­ri­ties and Ex­change Com­mis­sion. On May 4, the com­pany also re­ceived fi­nal ap­proval to set­tle a class-ac­tion law­suit that will pay share­hold­ers a to­tal of $88 mil­lion in cash and $113 mil­lion in stock.

Those set­tle­ments and the pro­posed whis­tle-blower pay­ments would put Well­Care’s to­tal legal pay­outs at more than $428 mil­lion in cash and stock.

Sep­a­rately, Well­Care has sued three for­mer ex­ec­u­tives who are ac­cused of mis­man­ag­ing the com­pany un­til 2007, though that lit­i­ga­tion was put on in­def­i­nite hold in March af­ter the ex­ec­u­tives—for­mer CEO Todd Farha, for­mer gen­eral coun­sel Thad­deus Bere­day, and for­mer chief fi­nan­cial of­fi­cer Paul Behrens—were in­dicted crim­i­nally by a fed­eral grand jury in Florida.

“The crim­i­nal trial will re­sult in a de­vel­oped fac­tual record that will pro­vide the par­ties with sub­stan­tial ev­i­dence that may be able to be uti­lized in this case,” at­tor­neys for both Well­Care and the ex­ec­u­tives wrote in their joint mo­tion for a stay in the law­suit pend­ing the out­come of the crim­i­nal case.

In a May 6 earn­ings re­port, Well­Care said it booked net in­come of $21.6 mil­lion in the quar­ter ended March 31, com­pared with $6.4 mil­lion in the same quar­ter a year ago.

Sean Hellein, one of four whistle­blow­ers, says he thinks Well­Care’s set­tle­ment of­fer is too low.

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