The New York Times-20080126-3 Leading Executives Resign At Insurer Under Inquiry

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3 Leading Executives Resign At Insurer Under Inquiry

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The top managers of WellCare Health Plans, an insurer being investigated by the F.B.I. for possible fraud, resigned Friday.

The company said that its chief executive, Todd S. Farha; finance chief, Paul L. Behrens; and general counsel, Thaddeus Bereday, quit and would remain as nonexecutive employees until March 31. The board named Charles G. Berg, 50, as executive chairman and Heath Scheisser, 40, as president and chief executive.

Carl McDonald, an analyst at Oppenheimer & Company in New York, said that new management would make WellCare an ideal acquisition target for one of the two largest insurers: UnitedHealth Group or WellPoint.

WellCare shares rose $3.17, or 7.4 percent, to $46.29 in after-hours trading after the announcement.

WellCare manages benefits for 160,000 elderly customers under Medicare plans and for 1.2 million low-income recipients of Medicaid benefits. The company, based in Tampa, Fla., is being investigated by federal and Florida authorities over possible overpayments, according to court records.

In October, 200 investigators conducted an all-day raid of the company's headquarters. Several agents interrupted a quarterly board meeting and held directors there for hours of interviews, according to The St. Petersburg Times. They left the campus with a rented truck filled with seized documents.

Two days after the raid, Connecticut officials said they were reviewing whether WellCare hid the extent of its profit on a health insurance contract with the state Medicaid program. The Securities and Exchange Commission is also investigating.

The company has said it is conducting an internal inquiry and is defending itself against a lawsuit filed by a former employee who said WellCare defrauded the government.

If prosecutors conclude that the three executives violated laws, their departure may help the company get better treatment from the government, said Martin L. Perschetz, a former federal prosecutor practicing law at Schulte Roth & Zabel in New York.

The government will consider the pervasiveness of the wrongdoing, how long it took the company to act, and to what degree the company is cooperating and voluntarily providing information, Mr. Perschetz said in a telephone interview. The government has discretion on whether to proceed criminally.