FBI Agents Raid WellCare

By CAROL GENTRY The Tampa Tribune

Published: Oct 25, 2007

TAMPA - About 200 agents from the FBI and other federal and state agencies descended on the headquarters of WellCare Health Plans on Wednesday morning in a raid, seizing laptop computers, files and boxes of documents.

The company declined to comment on the raid, other than to confirm that state and federal agents searched its four-building campus on Henderson Road and to assure clients that services would not be affected.

None of the agencies involved in the raid would comment on the reason for the search of the company, one of the nation's largest health insurers for government programs.

Agents from the FBI, the inspector general of the U.S. Department of Heath and Human Services, and the Florida attorney general's Medicaid Fraud Control Unit participated in Wednesday's search. They referred calls to the U.S. attorney's office in Tampa, but that office said it could not discuss the purpose of the search. Steve Cole, spokesman for the office, said there were no arrests.

The raid occurred on the same day as a scheduled quarterly meeting of WellCare's board of directors. Chip Burpee, an aide to former Florida governor and WellCare board member Bob Graham, said the meeting was scheduled at the insurer's headquarters Wednesday, but Graham was out of the country and unable to attend.

Typically, top executives of a company would be present at a quarterly board meeting.

WellCare, which has blossomed into one of the Tampa Bay area's largest and most successful companies, provides health and drug coverage for a combined 2.3 million Medicare and Medicaid beneficiaries nationwide.

The company, which booked net income of $139 million on $3.8 billion in revenue last year, issued a statement late Wednesday that it is cooperating with authorities and that none of its health plan members would be affected.

"Our number one priority is making sure that our members have access to needed care and services," the company said in the statement. "Our essential services are operational and will remain uninterrupted."

Essential employees, such as customer-service representatives, were allowed to remain on the job Wednesday. Other WellCare employees were sent home for the day. Hundreds of employees work at the company's Henderson Road campus. A recording on an employee hot line told workers to plan to work today.

WellCare's largest customer, the Florida Medicaid program, was not notified of the raid until reporters called, said Doc Kokol, spokesman for the Agency for Health Care Administration.

'Deeply Concerned'

Agency Secretary Andy Agwunobi and other top agency officials were conducting a disaster drill at the time of the raid and were closeted at the state's emergency operations center. Agwunobi, a former board member for WellCare, issued a statement later saying he was "deeply concerned" by the events at the company's headquarters, given that it is the health care provider for more than 350,000 Florida Medicaid beneficiaries.

"We will continue to monitor this situation closely and respond appropriately if necessary," the statement said.

Florida's Medicaid program paid WellCare's Florida HMOs, HealthEase and Staywell, about $59 million in September for about 356,000 low-income beneficiaries, the agency said. Annualized, this would be about $706 million out of this year's $2.2 billion budget for HMOs. Last year, WellCare received about $860 million from Florida taxpayers.

Calls to four of the company's board members were not returned. The company has an eight-member board.

Employees who witnessed the raid declined to be quoted by name. It was not known whether federal and state agents planned the raid to coincide with the company board meeting, but two WellCare employees who saw it said it was conducted with precision and that agents went immediately to the room where the board was meeting.

Thomas Carroll, an analyst with financial services firm Stifel Nicolaus, sent a note to clients Wednesday calling the raid "ominous" and downgrading the company's shares to "sell" from "hold."

"When the FBI and HHS raid a health care company, the outlook on earnings, legal proceedings, and the entire operations of the company can be questioned," Carroll said.

Carroll and others said agents required some executives to turn over their computers, files and BlackBerry communication devices. The agents copied executives' identification cards and required them to write down their computer passwords.

Timing Poor For Company

The New York Stock Exchange temporarily halted trading of WellCare's stock after word of the search spread. Shares, which had hit a 52-week high Monday, dropped $7.10, or 5.8 percent, to close at $115.50.

Health care industry analysts said the fallout from the raid is bound to be damaging, especially for a company that exclusively contracts with government agencies rather than the private sector.

"This company lives and dies by its reputation," said John Ransom, director of health care research at Raymond James.

WellCare, which had Medicaid contracts with seven states last year, has no commercial accounts. The company, which offers its Medicare drug plans in all 50 states and the District of Columbia, has 971,000 enrolled.

The company also has Medicare Advantage plans, which replace traditional Medicare for the elderly and disabled. WellCare, which drew public criticism at congressional hearings in May and June for marketing abuses, was one of seven companies that voluntarily stopped marketing some plans so it could set up customer protections and train its sales agents. The Centers for Medicare and Medicaid Services let the companies resume marketing last month.

The timing of the search could hardly be worse. Marketing for Medicare drug plans and Medicare Advantage plans for 2008 is under way, and enrollment begins Nov. 15.

The company also is expected to announce third-quarter earnings on Nov. 5.

Reporter Carol Gentry can be reached at (813) 259-7624 or cgentry@tampatrib.com.