Ex-WellCare Executives Found Guilty of Fraud in Florida

WellCare Health Plans Inc. (WCG)’s former chief executive officer and chief financial officer were found guilty of fraud in a federal crackdown on cheating in government-funded health programs.

Todd Farha, 45, the former CEO, and Paul Behrens, 51, the former CFO, were convicted yesterday by a jury in Tampa, Florida, of two counts of health-care fraud, the U.S. Justice Department said in a statement. Behrens was also found guilty of two counts of making false statements.

The executives were charged in March 2011 with devising a scheme to defraud the Florida Medicaid program and making false, fraudulent statements on expenses for behavioral health-care services. Also convicted were William Kale, 63, a former vice president of WellCare unit Harmony Behavioral Health, and Peter Clay, 56, a former WellCare vice president of medical economics.

Companies in Florida are required to spend at least 80 percent of the money given by Medicaid for mental health care directly on patients. If they spend less, they are supposed to give the difference to the state. The executives avoided making the refunds to the state by setting up a unit to hide the money from regulators, according to prosecutors. They also falsified information on payments to doctors and mental health centers.

Whistle-Blower Claim

From 2003 through 2007, Tampa-based WellCare failed to pay the state $40 million in refunds, prosecutors said. A whistle-blower at the company, financial analyst Sean Hellein, told the Federal Bureau of Investigation about the plot and cooperated in its investigation.

WellCare has paid out at least $427 million in settlements to government agencies and shareholders since 2007.

“The company acted swiftly in October 2007 upon learning of the wrongdoing and separated the individuals involved,” Jack Maurer, a spokesman for WellCare, said in an e-mailed statement. “Over the past five years we have cooperated fully with state and federal authorities in their investigations, and resolved all of the issues that directly involved the company.”

WellCare sued its former executives and that action was stayed pending the outcome of the criminal trial, Maurer said.

“We have made significant changes to the governance of our company to help ensure that this never happens again,” he said.

The maximum penalty for the health-care fraud is 10 years in prison for each count. For other charges, the top sentence is five years. No sentencing date has been set. The jury found the defendants not guilty of some charges and reached no verdict on others.

WellCare’s former general counsel, Thaddeus Bereday, will be tried separately, according to the government.

The case is U.S. v. Farha, 11-00115, U.S. District Court, Middle District of Florida (Tampa).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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