Friday, October 26, 2007

Here Come the Lawyers to WellCare

The search of WellCare Health Plan's headquarters by, among others, FBI agents (earlier post here) triggered -- as expected -- an immediate response: let's hire lawyers!  A press release (on Business Wire here) states that since the search and carting away of boxes of documents, the company has:

  • Been in direct contact with its Board of Directors, including members of the audit committee;
  • Committed to cooperating with the federal and state authorities involved in the investigation;
  • Retained the law firms of King & Spalding and Greenburg [sic] Traurig to assist the Company with responding to the investigation;
  • Engaged with the Companys auditors, Deloitte & Touche LLP;
  • Been in contact with key constituents, including state and federal regulators in each of the Companys markets.

It's not clear why two national law firms have been retained, but maybe two -- or twenty counting all the partners and associates -- heads are better than one.  WellCare's stock lost over 60% of its value the day following the search, showing the devastating effect a criminal investigation can have for a company's investors.  While the scope of the investigation is not yet clear, any inquiry into possible healthcare fraud carries a serious danger of criminal and civil fines and penalties, and could even include exclusion from the Medicaid program if an extensive fraudulent scheme were uncovered.  (ph)

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Tracked on Nov 3, 2007 4:15:17 AM

Comments

The retention of these two great silk-stocking law firms guarantees one thing: (1)the internal investigation will lay the blame at the feet of each and every executive deemed expendable to protect/save the company. WellCare's executives best remember--these law firms represent the company NOT you; in their eyes, you are the sacrificial lambs!

Posted by: steve sadow | Oct 26, 2007 4:56:02 AM

Perhaps one law firm was retained by the Audit Committee/independent directors to conduct an unbiased investigation, while the other was hired to defend the company as a whole. It's not unusual for a company under investigation to set up a Special Investigation Committee , with its own counsel, to look at the allegations. The Special Committee's interest may not always be aligned with the rest of the Board's and management's interests, so it makes sense to have a different law firm represents the company.

Posted by: Oren Rosenthal | Oct 26, 2007 12:06:36 PM

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