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3 Top Executives Resign From WellCare
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Published: January 26, 2008
TAMPA - In the wake of federal and state investigations into the company and a stock market free-fall, WellCare Health Plans chief executive Todd Farha and two other executives resigned Friday.
Farha, 39, announced his departure three months after federal agents stormed the company's Henderson Road headquarters Oct. 24. Agents removed documents and computer drives, but the U.S. attorney based in Tampa has not revealed the target of the investigation. The state attorney general's office also is investigating WellCare.
Farha served as chairman, chief executive officer and president. Also stepping down Friday were Paul Behrens, chief financial officer, and Thaddeus Bereday, general counsel. Bloomberg News reported Friday that all three men will remain with the company as nonexecutive employees until March 31.
The moves were not unexpected. A Wall Street Journal blog reported Wednesday that negotiations for the departure of the trio were under way.
Some analysts also suggested WellCare may be placed on the block, but a spokeswoman insisted Friday that the company is not for sale.
Charles G. Berg, a senior adviser to the Welsh, Carson, Anderson & Stowe private equity firm, was named to the new position of executive chairman and to the board of directors. Heath Schiesser, a WellCare senior adviser, was named president and CEO and also given a seat on the board. The company said it has started a search for a CFO and general counsel.
The simultaneous departure of three top corporate executives is unusual but not unprecedented, said Charles Elson, a corporate governance expert and professor at the University of Delaware, and a former law professor at Stetson University College of Law in St. Petersburg.
"You will have an immediate vacuum in leadership that will have to be filled," Elson said. "That's very challenging for the board" of directors.
WellCare Counting On Experience
Elson said companies must have a solid succession plan in place to survive such a void.
The WellCare board is counting on Berg, 50, who has previously served as CEO of Oxford Health Plans and was an executive with UnitedHealth Group, and Schiesser, 40, who has held several executive roles with WellCare since 2002.
"The board has confidence in these new executives. They will provide fresh leadership to the company to help meet the challenges and opportunities it faces," said Ruben Jose King-Shaw Jr., a member of WellCare's board.
WellCare administers Medicare and Medicaid health plans for federal and state governments. It operates Medicaid plans in seven states and Medicaid prescription drug plans in all 50 states.
Analysts have said they think the company is under investigation for overcharges in its Florida operations.
The company reported net income of $139 million on $3.8 billion in revenue last year.
WellCare shares plunged from $122.27 to $22.04 in the week after October's raid. The stock had recovered to $56.43 on Jan. 14, but fell every day this week except Friday, when shares rose 87 cents to $43.12.
According to his biography in WellCare regulatory filings, Farha came to WellCare in May 2002 after serving as chief executive of Best Doctors, a Boston-based physician referral service for patients with critical illnesses. He also served as chief executive of Oxford Specialty Management, a subsidiary of Oxford Health Plans - the same company on Berg's resume.
A stock analyst with Credit Suisse, Gregory Nersessian, noted in a report this week that WellCare is the second company with Farha as a senior executive that ran into legal and financial trouble. In a report he labeled "Lightning Strikes Twice," Nersessian compared the 1997 blow-up at Oxford Health Plans with the recent turmoil at WellCare.
In October 1997, Oxford stock dropped 63 percent in a single day after it was revealed the managed care company suffered unexpected losses and was behind in paying doctors and hospitals. It was not clear this week how much Farha - who was chief executive at a subsidiary - shared in responsibility for the meltdown at the parent company Oxford.
Farha Called Hardworking, Tough
Two local businesspeople who know Farha described him as a bright, hardworking leader known to put in long hours at the office.
Sandy Murman, a former state representative and WellCare lobbyist, said Farha steered WellCare from a minor player in Florida's Medicaid market to a major force. He was frequently involved in Medicaid issues before the Florida Legislature.
Outside of work, he was active in Republican Party politics, sat on the board of the Tampa Museum of Art and was active in and routinely contributed to the American Heart Association, Murman said.
Sandip Patel, a Clearwater developer and former general counsel for WellCare, squared off against Farha early this decade, when Farha and his investment group negotiated to buy WellCare. Patel, who negotiated on behalf of WellCare's then-owners, said Farha was a tough negotiator who later went on to take the company to the next level.
"The guy had his head on straight," said Patel, not related to WellCare founder Kiran Patel. "He was detail-oriented. We got it to a point, and he got it over the end zone."
Analysts considered WellCare's management top-heavy. "There is the CEO, Todd Farha, and everyone else," wrote Oppenheimer analysts in a report this week.
Nonetheless, Farha was media-shy and was rarely seen at corporate or major public events.
"My six and a half years leading WellCare are the most professionally rewarding of my life," Farha said in a statement distributed late Friday by his attorney. "We transformed a small struggling health plan into a high-quality, high-care health care company serving more than 2 million low-income and senior citizens in all 50 states."
Farha will be available to consult for the company through June 30, according to the statement.
Reporter Jerome R. Stockfisch can be reached at jstockfisch@tampatrib.com or (813) 259-8402. Reporter Michael Sasso can be reached at (813) 259-7865 or msasso@tampatrib.com.
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Reader Comments
Posted by ( MrShrek ) on January 26, 2008 at 8:01 a.m. ( Suggest removal )
Stockmarket free fall notwithstanding, I would guarantee that the severance packages that Larry, Curley and Moe received do not reflect a free fall. They did o.k. for themselves, right boys?
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Posted by ( areader ) on January 26, 2008 at 11:57 a.m. ( Suggest removal )
WellCare owns both HealthEase and StayWell - the article failed to mention the word "Medicaid Fraud" but I'm sure I had read in the Tbo that Medicaid Fraud was one of the reasons it was being investigated by the FBI and the States Attorneys Office. I feel sorry for all those who have StayWell and HealthEase Medicaid plans because services are sure to be cut with the stock falling.
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