Case MaterialsMotion for Final Approval of Settlement
August 9, 2010
Lead Plaintiffs Announce $200 Million Settlement with Wellcare Health Plans, Inc.
Eastwood Enterprises, LLC v. Farha et al. (WellCare Securities Litigation)
A $200 million settlement was approved in one of the largest securities fraud cases to emerge from the healthcare sector.
In May 4, 2011, the Honorable Virginia M. Hernandez Covington of the United States District Court for the Middle District of Florida (Tampa Division), granted final approval to a settlement in the class action Eastwood Enterprises, LLC v. Todd S. Farha, et al., No. 8:07-CV-1940-VMC-EAJ. The settlement is for a face amount of at least $200,000,000, consisting of: (i) $52,500,000 in cash, plus interest as it accrues; (ii) a $35,000,000 non-interest bearing promissory note due and payable in cash no later than July 31, 2011 ("WellCare Note"); and (iii) $112,500,000 in freely tradable, registration-exempt bonds with a maturity date of December 31, 2016, and with a fixed coupon of 6% (the "Bonds"). Under the terms of the settlement, WellCare further agrees to pay an additional $25 million in cash if, at any time in the next three years, WellCare is acquired or otherwise experiences a change in control at a share price of $30 or more after adjustments for dilution or stock splits. WellCare also agrees that, should it recover any sums from individual defendants in the derivative case, it will pay 25% of those proceeds to the Class.
Labaton Sucharow is the Court-appointed co-lead counsel for lead plaintiffs the New Mexico State Investment Council, the Public Employees Retirement Association of New Mexico, the Teachers' Retirement System of Louisiana, the Policemen's Annuity and Benefit Fund of Chicago, the Public School Teachers' Pension and Retirement Fund of Chicago and the Class.
Lead plaintiffs alleged that WellCare Health Plans, Inc. ("WellCare"), a Florida-based managed healthcare service provider, and certain individual defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. WellCare lost $3.6 billion in market capitalization when it revealed that it was the subject of investigations by the FBI, the Attorneys General of Florida and Connecticut, and the SEC. Lead plaintiffs alleged that WellCare systematically overcharged state Medicaid programs by hiding WellCare's profitability in state filings thereby obtaining higher payments from the states for WellCare's plans. Lead plaintiffs also alleged that there was significant and suspiciously timed insider selling of more than $525 million of WellCare stock.
On March 11, 2008, the New Mexico State Investment Council and the Public Employees Retirement Association of New Mexico were appointed as co-lead plaintiffs in this action. Labaton Sucharow, along with co-lead counsel, filed a consolidated amended complaint on October 31, 2008. On September 28, 2009 the Court denied motions to dismiss the consolidated complaint, and discovery commenced. After reviewing millions of pages of documents and taking the depositions of former company employees and non-party witnesses, Labaton Sucharow and its co-lead counsel announced on August 9, 2010 that they had brokered the present $200,000,000 settlement with defendants.
If you purchased or otherwise acquired WellCare common stock during the period from February 14, 2005 through 10:59 a.m. Eastern Standard Time on October 24, 2007, inclusive, and were allegedly damaged thereby, you may be eligible to recover if you submitted a Proof of Claim form with supporting documents by June 4, 2011.
A copy of the Order and Judgment, Notice, Proof of Claim and Release form, and the Stipulation and Agreement of Settlement can be accessed by clicking on the links to the right.