Wellcare Management Group, Inc. - Securities Class Action

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Copyright (c) 2001
Stanford Law School

Wellcare Management Group, Inc. Conclusion: According to FORM 10-K for the fiscal year ended December 31, 1999, in May of 1999, the Company entered into a settlement agreement for $2.5 million, all of which is being funded by the insurance carrier who provided coverage to the Company and the individual defendants. The settlement agreement received Federal Court approval in January 2000. The Company expects to recoup from the insurance carrier the expenses related to fees it paid to the attorneys representing the Company and the individual defendants, less the Company's insurance deductible. However, a receivable has not been accrued because the recovery amount was not determinable at December 31, 1999.

In July 1996, the Securities Litigations were consolidated in the United States District Court for the Northern District of New York, and an amended consolidating complaint (the "Complaint") was served in August 1996. The Complaint did not name the three additional directors. The Company's auditor, Deloitte and Touche, LLP, however, was named as an additional defendant. In October 1996, the Company filed a motion to dismiss the consolidated amended complaint against the Company as well as the individual defendants. The Company's auditor likewise filed its own motion to dismiss. By Memorandum Decision and Order (the "Order"), entered in April 1997, the Court (i) granted the auditor's motion to dismiss and ordered that the claims against the auditors be dismissed with prejudice; and (ii) denied the motion to dismiss brought by the individual defendants. Because the Order did not specifically address the Company's motion to dismiss, in May 1997, the Company moved for reconsideration of its motion to dismiss and dismissal of all claims asserted against it. On reconsideration, the judge clarified his previous ruling expanding it to include a denial of the Company's motion as well. Following the Court's decision, the Company filed its answer and defense to the Complaint. In September 1997, the plaintiffs' class was certified and the parties thereafter commenced the discovery process of the litigation.

The original Complaint alleged that the Company's financial statements of August 2, 1994 did not fairly or accurately report the Company's true financial results, in that they stressed cost effective service, rather than improper accounting, as the source of expense reduction, and they violated GAAP. Based on these allegations, plaintiffs allege violations of Sections 10(b) and 20(a) of the 1934 Securities Exchange Act, and Rule 10b-5 promulgated thereunder.

Specifically complaint alleged that on August 2, 1994 the Company reported total revenue of $29,707,000 and net income of $1,466,009, or $0.24 per share, for the quarter. Subsequent quarterly reports indicated similar or better results. On February 14, 1995, the Company reported total revenue of $121,770,000 and net income of $6,238,000, or $1.00 per share, for 1994. The Company's April 1995 Annual Report to Shareholders claimed that the Company was providing high quality health care in a cost-effective manner and noted the Company's revenue and membership growth. On February 14, 1996, the Company reported total revenue of $156,213,000 and net income of $7,814,000, or $1.25 per share, for 1995. Approximately one month later, Barron's, a financial publication, published an article on WMG which, according to plaintiffs, concluded that various unusual transactions had inflated WMG's profits. Barron's based this conclusion on its examination of internal company documents being reviewed by lled "other receivables" which included $4.5 million purportedly owed by various hospitals for medical advances, but which the hospitals in fact claimed was owed to them. The March 16, 1996 Barron's report preceded a drop in stock price from $23.75 to $16.50, and a drop from a class period high of $37. Plaintiffs allege that defendants engaged in deceptive transactions which lacked a valid business purpose and were designed to inflate the reported profits of the Company, thus artificially inflating the value of the Company's securities. The alleged transactions include the various transactions outlined in the Barron's article.

INDUSTRY CLASSIFICATION:
SIC Code: 6324
Sector: Financial
Industry: Insurance (Accident & Health)

COMPANY/ISSUER NAME:	Wellcare Management Group, Inc.
COMPANY/ISSUER TICKER:	WELLE [DELISTED]
COMPANY WEBSITE:	http://www.wellcare.com

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Ward, et al. v. Wellcare Management Group, Inc.

COURT: N.D. New York	DOCKET NUMBER: 96-CV-0521
JUDGE NAME: Magistrate Judge David R. Homer
DATE FILED: 03/29/1996	SOURCE: Complaint
CLASS PERIOD START: 08/02/1994	CLASS PERIOD END: 03/18/1996
TYPE OF COMPLAINT: Unamended/Unconsolidated
PLAINTIFF FIRMS IN THIS OR SIMILAR CASE:
Milberg Weiss Bershad Hynes & Lerach LLP (San Diego, CA) 600 West Broadway, 1800 One America Plaza, San Diego, CA, 92101 (voice) 800.449.4900, (fax) , support@milberg.com Whiteman, Osterman & Hanna One Commerce Plaza, Albany, NY, 12260 (voice) 518.487.7600, (fax) 518.487.7777, _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 2

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Class Action Complaint for Violations of the Federal Securities Laws
Type: Complaint		Date on the document: 03/26/1996

REFERENCE COMPLAINT

In Re: Wellcare Management Group, Inc. Securities Litigation

COURT: N.D. New York	DOCKET NUMBER: 96-CV-0521
JUDGE NAME: Hon. Thomas J. McAvoy
DATE FILED: 08/21/1996	SOURCE: Business Wires
CLASS PERIOD START: 08/02/1994	CLASS PERIOD END: 03/18/1996
TYPE OF COMPLAINT: Consolidated and/or Amended
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Bernstein Litowitz Berger & Grossmann LLP (New York, NY) 1285 Avenue of the Americas, 33rd Floor, New York, NY, 10019 (voice) 212.554.1400, (fax) 212.554.1444, blbg@blbglaw.com Milberg Weiss Bershad Hynes & Lerach LLP (New York, NY) One Pennsylvania Plaza, New York, NY, 10119-1065 (voice) 212.594.5300, (fax) , _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 2

DOCUMENTS FOR THE REFERENCE COMPLAINT
Memorandum-Decision & Order
Type: Order		Date on the document: 04/30/1997
Notice of Settlement of Class Action and Settlement Hearing
Type: Settlement		Date on the document: 09/29/1999
U.S. District Court Civil Docket
Type: Docket		Date on the document: 03/27/2001

OTHER DOCUMENTS

Case Name and/or Number:
Type:		Date on the document:

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