WellCare to Conduct Own Probe; Raid Involved Fraud

WellCare Health Plans said the special committee of its board of directors formed in response to investigations by federal and state authorities will conduct its own independent probe of matters raised by those investigations. A separate panel was formed to work with the board's audit committee if any accounting matters are identified. On October 24, the company's Tampa headquarters were raided by the Florida Attorney General's Medicaid Fraud Control Unit and the FBI. The Company also has received information requests from the SEC. WellCare said it is cooperating with the authorities, but that it still had not been informed as to what the subject of the investigation is or what impact it might have on the company. However, a person familiar with the matter said the raid was prompted, at least in part, by allegations that WellCare inflated the amount it spent on mental-health care so it could keep funds that should have been refunded to Medicaid, allegedly costing the program more than $35M over a five-year period, the Wall Street Journal reported Saturday. WellCare shares, which were at $122.27 the day before the raid closed at $27.37 on Friday. Meanwhile, the company delayed issuing its form 10-Q and any future quarterly filings until the investigations are completed. It said, however, it will proceed with its planned webcast on Monday and release preliminary figures for the quarter ended September 30.

Sources: Press release, Wall Street Journal, AP,
Commentary: WellCare Plummets After FBI Raid • WellCare Health Plans' Day of Reckoning May Have Arrived
Stocks to watch: WCG. Competitors: AGP, CNC. ETFs: PTJ, PIQ

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