TAMPA, Fla. - (Mealey's) WellCare Health Plans Inc. announced Aug. 9 that it has reached an agreement to settle for $200 million a putative securities fraud class action that was brought against it in a Florida federal court (Eastwood Enterprises, LLC, et al. v. Todd S. Farha, et al., No. 8:07-cv-1940-T-33EAJ, M.D. Fla.).
A class of investors represented by lead plaintiffs the New Mexico State Investment Council, the Public Employees Retirement Association of New Mexico, the Teachers' Retirement System of Louisiana, the Policemen's Annuity and Benefit Fund of Chicago and the Public School Teachers' Pension & Retirement Fund of Chicago sued WellCare and its senior officers in the U.S. District Court for the Middle District of Florida. The plaintiffs allege that the company improperly retained more than $46.5 million in Medicaid funds that were owed to the States of Florida and Illinois from 2004 to the first half of 2007. WellCare provides managed care services to Medicaid and Medicare recipients.
On July 21, 2008, WellCare announced that it would restate its financial results for the time period in question. The U.S. Attorney for the Middle District of Florida and the Securities and Exchange Commission also launched investigations into the alleged fraud, and WellCare resolved these investigations in May 2009.
The plaintiffs allege that the defendants violated Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
WellCare said in yesterday's press release that the settlement will require approval by the court. The settlement provides that WellCare will make $52.5 million in cash payments to the class within 30 days of the court's preliminary approval of the settlement and $30.5 million by July 31, 2011. It also will issue $112.5 million in tradable unsecured bonds to the class, WellCare said.
"In addition, if within three years of the agreement WellCare experiences a change in control at a share price of $30 or more, the Company will make an incremental $25.0 million payment to the class," WellCare said.
[Editor's Note: Full coverage will be in the September issue of Mealey's Emerging Securities Litigation. In the meantime, the consolidated class action complaint is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844. Document #57-100914-002C. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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For more information, call editor Dylan McGuire at 610-205-1114, or e-mail him at Dylan.McGuire@lexisnexis.com.