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WellCare Officials Leaving With Millions In Stock Options

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By RICHARD MULLINS, The Tampa Tribune

Published: February 2, 2008

TAMPA - The three top executives leaving WellCare Health Plans will walk away from the company with millions of dollars in stock options and restricted stock, as long as they agree not to disparage the company and agree to cooperate with government investigations into its operations.

If they cooperate with the company amid transition to new executives, at least one former executive also will receive consulting fees of $500 an hour.

The exit packages were included in documents filed this week with the Securities and Exchange Commission, and detailed outgoing compensation for three people: Todd Farha, the former chief executive, president and chairman, plus Paul Behrens, the former chief financial officer, and Thaddeus Bereday, the former general counsel.

Tampa-based WellCare is one of the nation's largest administrators of government health insurance plans, and is currently the subject of law enforcement probes into its operations following a raid last October of their offices in Tampa. The company has denied any wrongdoing and pledged to cooperate fully with any government probes.

Farha's only comment on his departure came in the form of a news release distributed Jan. 25. Farha said in part, "We transformed a small struggling health plan into a high-quality, health-care company serving more than two million low-income and senior citizens in all 50 states. I take great pride in WellCare's success and look forward with enthusiasm to new opportunities."

Farha and the other departing executives could not be reached for comment Friday.

The transitions were not altogether unexpected. Stock in WellCare plunged 80 percent amid the raid to about $22 a share. It has recovered since then to close at $47.57 Friday, up 67 cents a share. A Wall Street Journal blog reported last week that negotiations for their departure were under way.

Details of their exit packages emerged on Friday. The SEC documents show that:

•Farha agreed to cooperate in an "orderly transition" to new executive leadership, and will receive compensation of $500 an hour, plus "appropriate and reasonable expenses." Assuming the company and Farha cooperate, by March 31, other options and restricted stock held by Farha will vest, totaling about $8.2 million based on Friday's closing stock price.

•Bereday will exit with about $1 million in holdings vested and Behrens will exit with about $350,000 in holdings. All those values will fluctuate with WellCare's stock price. If it rises, the options and restricted stock will become more valuable.

•All three executives also signed a relatively standard term in modern separation packages - pledging that they will not make any "knowingly false comments" about WellCare.

As of Jan. 25, the job of running WellCare fell to new top executive leadership. Heath Schiesser will become president and chief executive officer. Previously, Schiesser, 40, served as WellCare's senior vice president for marketing and sales from 2002 to 2006 and president of WellCare prescription insurance from 2005 to 2006. Since then, he has served as a senior advisor to the company.

Prior to joining WellCare, Schiesser worked at the management consulting firm of McKinsey & Co. and co-founded an online pharmacy for Express Scripts.

Schiesser will enter the company with a salary of $400,000, with a targeted bonus at 200 percent of that level. He also receives 250,000 restricted shares in the company that will vest over a period of four years. As of Friday's stock price, those shares would be worth about $11.8 million. Those shares would immediately vest if the company was sold or there was another change in control. He also receives 500,000 stock options with a strike price of $43.12 a share. If WellCare's stock prices rises, the value of those options would rise as well.

Charles G. Berg was named to the newly created post of executive chairman of the company.

Previously, Berg served as chief executive officer of Oxford Health Plans. His employment agreement calls for $500,000 in base salary, plus 200,000 restricted shares and 300,000 options.

All of the transitions became effective Jan. 25.

Reporter Richard Mullins can be reached at (813) 259-7919 or rmullins@tampatrib.com.

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