Centene Corp. has found itself entangled in a legal tussle with pension funds. The latter did accuse the insurer of misrepresenting the 2016 takeover of Health Net, which the lawsuit said proved to be disadvantageous. The deal injured the interest of the company and investors alike.
Centene revealed in 2015 that talks were underway to merge with Health Net, and the deal was finalized in March 2016. From the beginning, CEO Michael Neirdorff was persistent in assuring company investors that the move was for expansion and growth. Neirdorff insisted that Health Net will pave the way for Centene to perform better in the lucrative market of California. The company chief assured: Centene is looked set for happy days.
However, shareholders, including the Carpenters Pension Fund of Illinois and Iron Workers Local 11 Pension Fund of Chicago, had belatedly realized that Neirdorff was not telling the whole story. The pensions funds later discovered that Health Net was an ailing outfit, and betting on the merger led to avoidable losses.
Shareholders Took A Big Hit Because Neirdorff Lied
In the lawsuit filed by the pension funds, it was alleged that Centene’s $6-billion takeover of Health Net was hard to justify. The suit further claimed that because top company executives decided to hide the truth from shareholders, millions of dollars have been lost and impacted mostly the investors, whose only fault was to trust Neirdorff’s lead.
But the worst thing that came to light was the indication that Neirdorff and other top Centene officials even profited from the lackluster merger. When it became known that Health Net had serious liabilities, Centene’s shares took a nosedive, and around a billion dollars were wiped out from its worth.
Neirdorff and his close associates, however, seemed to have anticipated the crash. The suit claimed the chief executive and his cohorts engaged in insider selling of Centene shares. The move allowed them to capitalize on company stocks by the tens of millions while the ordinary shareholders took a beating when the shares suffered a significant retreat.
Owing to these actions by Neirdorff, Centene’s standing in the business community is now in big question, and the lawsuit warned that the insurer has become vulnerable to potential legal troubles. Indeed, the facts of the case can be used to bring Centene before the court for possible violations of federal and state regulations, per the filings made by the pension funds.
Centene Officials Feel No Remorse Amid Fraud Accusations
The suit’s main beef against Centene is the seeming unwillingness of critical officials to act accordingly and correct the mistake that Health Net turned out to be. Instead of admitting fault, the insurer attempted to hide its losses by turning its attention on Health Net’s policyholders. Neirdorff did acknowledge that Health Net was bleeding financially, and he tried to save face by indiscriminately denying payment claims from behavioral treatment centers in California.
Centene is presently inflicting suffering and bearing the brunt of the plague are the mental care facilities and thousands of their patients. Neirdorff knew all along that complications would arise after the merger and the step he chose to take was to continue Health Net’s business model of giving premium to dollars over humans. The CEO made his choice on how to start on the road to redemption, which likely will lead to countless casualties – the Centene shareholders, the treatment centers, and the thousands of helpless mental patients.
