TBO.com - TBO is Tampa Bay Online

Sale Of WellCare Now Rumored

ADVERTISEMENT

By JEROME R. STOCKFISCH and RICHARD MULLINS, The Tampa Tribune

Published: January 25, 2008

TAMPA - Shares of WellCare Health Plans continued to slump Thursday amid reports of the possible departure of its top three executives, and analysts at one Wall Street firm said they are not only expecting the housecleaning, but would not be surprised to see the sale of the company.

The Wall Street Journal's Health Blog reported late Wednesday that the WellCare board of directors was negotiating severance packages for Chief Executive Officer Todd Farha, Chief Financial Officer Paul Behrens and general counsel Thaddeus Bereday. It did not name its sources for the report.

On Thursday, analysts who follow WellCare for Oppenheimer & Co. said the loss of the three executives "can't be viewed as a total surprise, since it's a fairly common consequence when 200 FBI agents show up on your doorstep."
Oppenheimer said WellCare's top-heavy management - "There is the CEO, Todd Farha, and everyone else" - lends credence to the idea "that WellCare will be put on sale, if it isn't already."

A WellCare spokeswoman e-mailed a written statement Thursday, saying only, "WellCare does not comment on speculation about the company by members of the media or others."

WellCare shares closed at $42.25, down $8.69, or 17 percent, on Thursday.

The Tampa-based company administers Medicare and Medicaid health plans for federal and state governments. It was raided by federal agents Oct. 24.

The U.S. Attorney's Office based in Tampa has not disclosed the subject of the investigation, and no arrests have been made. Agents seized documents and computer drives from WellCare's headquarters on Henderson Road.

The company's shares plunged from $122.27 to $22.04 in the week after the raid. Shares recently gained ground as investors concluded the probe was limited chiefly to potential overpayments in Florida operations and fraud was not widespread throughout the WellCare system. Analysts suggested WellCare would settle the case and pay a fine.

Its shares had recovered to a recent high of $56.43 on Jan. 14 after the company announced it received renewal of federal contracts in five states, including Florida, along with permission to expand into hundreds of additional counties.

The Oppenheimer analysts reiterated Thursday that "the fact that the departures of the three executives are being negotiated could be an indication that the government investigation is not widespread. If fraud was clearly committed, there probably wouldn't be any negotiations going on; the executives would simply be fired."

The departures do not come "entirely out of the blue," the analysts' report states. "When 200 FBI agents show up on your doorstep, job security generally becomes a very murky concept."

The analysts said it would be preferable if the actions were being taken at the direction or at least with the blessing of the U.S. Attorney, which would indicate a settlement was close at hand. However, "this does not appear to be the case," they said.

The company does not have a logical internal candidate to take over the top spot and could be run short-term by the board of directors, the report stated, adding that fact suggests WellCare is ripe for a sale.

The report named UnitedHealth Group of Minnetonka, Minn., and WellPoint Inc. of Indianapolis, two of the larger companies in health plan administration, as potential suitors.

Reporter Jerome R. Stockfisch can be reached at (813) 259-8402 or jstockfisch @tampatrib.com. Reporter Richard Mullins can be reached at (813) 259-7919 or rmullins@tampatrib.com.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT