WellCare Health Plans Inc. Agrees to Settlement In Shareholder Class Action
February 2011 - To all persons and entities that purchased or otherwise acquired the common stock of Wellcare Health Plans during the period from February 14, 2005 through October 24, 2007, inclusive, you may be entitled to a payment from this proposed settlement. If approved by the Court, the proposed Settlement will create a settlement fund in the face amount of at least $200,000,000 for the benefit of eligible investors who purchased or otherwise acquired the common stock of WellCare Health Plans, Inc. during the Class Period. The Court will review the Settlement at the Settlement Hearing to be held on May 4, 2011.
According to a press release dated, the complaint charges Defendants WellCare, along with its Chief Executive Officer, President and Chairman of its Board of Directors, and its Chief Financial Officer and Senior Vice President with making a series of materially false and misleading statements related to the Company’s business and operations in violation of the Securities Exchange Act of 1934 (the “Exchange Act”).
On October 24, 2007, state and federal law-enforcement agents armed with a federal search warrant raided WellCare’s Tampa, Florida headquarters. Agents from the Federal Bureau of Investigation, the Health and Human Services Department and the Florida attorney general’s Medicaid fraud unit participated in the raid. WellCare provides managed-care plans for 2.3 million Medicare and Medicaid participants nationwide.
Specifically, the Complaint filed alleges that at all times during the Class Period: (1) it was not true that the Company was operating according to plan, when, in fact, throughout the Class Period, defendants had propped up the Company’s results by manipulating WellCare’s accounting for revenues and income, and failed to report proper expenses and other material information about the Company;(2) unbeknownst to investors, defendants had materially overstated the Company’s profitability by failing to properly account for the Company’s health care expenses and results of operations and by artificially inflating the Company’s financial results; (3) it was also not true that WellCare contained adequate systems of internal operational or financial controls, such that WellCare’s reported financial statements were true, accurate or reliable; (4) as a result of the foregoing, it also was not true that the Company’s financial statements and reports were prepared in accordance with GAAP ad SEC rules. Accordingly, as a result of the aforementioned adverse conditions which defendants failed to disclose, throughout the Class Period, defendants lacked any reasonable basis to claim that WellCare was operating according to plan, or that WellCare could achieve guidance sponsored and/or endorsed by defendants.
Following the news of the raid on WellCare’s headquarters, the New York Stock Exchange subsequently halted trading of shares in WellCare. The Company’s shares fell $7.10, or 5.8%, to $115.17 per share at market close on October 24, 2007. Then, on October 25, 2007, when shares resumed trading, shares opened at approximately $64.00 per share, before reaching an intra day low of $27.50 and closing at $42.67.