CHS determined that the securities-lending program was proving too risky,
Wachovia Corp Sued by Carolinas Health Care System for More than $19 Million in “Bad” Investments
Posted On: January 19, 2009 by Shepherd Smith & Edwards
Wachovia Corp Sued by Carolinas Health Care System for More than $19 Million in “Bad” InvestmentsCarolinas Healthcare System (CHS) is suing Wachovia Corp for alleged bad investments that resulted in losses valued at over $19 million. CHS is also accusing the bank of “directly misleading” it, misrepresenting the risks associated with the investments, and failing to follow the hospital system's orders that it be withdrawn from the securities-lending program. Wachovia spokesperson Mary Eshet says that the company disagrees about the allegations, was always in compliance, and only made appropriate investments for CHS.
In 2003, according to the investment fraud lawsuit, Wachovia recommended that CHS take part in a securities-lending program. As a participant, a third party would borrow securities from CHS's portfolio in return for collateral that would be invested by Wachovia until the securities were returned. This would also hopefully result in additional returns.
Per the agreement, Wachovia was only supposed to invest in safe, liquid, quality securities. Any time CHS opted to withdraw from the program, the hospital system was supposed to get all of its investments back within five business days. Also, Wachovia would be allowed to keep 40% of the profits on one account and 35% on the other account.
Last summer, CHS determined that the securities-lending program was proving too risky, especially with the markets collapsing. In September, CHS notified Wachovia to return all borrowed securities right away.
Wachovia couldn’t return all of the securities immediately. Wachovia had invested for CHS $14.9 million in Sigma Finance Corp-issued floating rate notes (now worth $750,000) and $5 million in Pricoa Global Funding floating-rate notes (now worth $4.95 million).
The lawsuit contends that Wachovia never notified Carolinas HealthCare System that the investments were not appropriate until CHS decided to end its participation in the securities-leading program. 5 days after Sigma went into receivership last October, Wachovia told the hospital system for the first time that its investment was, at that time, worth just $1.8 million. CHS says there is no market for the Pricoa notes.
CHS contends that Wachovia gained 40% of the profits but did not suffer any of the losses. The hospital system is solely responsible for returning the lost collateral to its securities borrowers.
CHS sues Wachovia over investment advice, Charlotte Observer, January 15, 2009
CHS files suit vs. Wachovia over losses on investments, Charlotte Business Journal, January 9, 2009
Related Web Resources:
Carolinas HealthCare System
Wachovia Corp
Call or e-mail Shepherd Smith Edwards and Kantas LLP today.
Wednesday, January 21, 2009
SouthernCare Inc., $24.7 million to settle charges it made false claims
SouthernCare Inc., based in Birmingham, Alabama, has agreed to pay $24.7 million to settle charges it made false claims to the government concerning medicare reimbursements for patients who did not qualify. The case brought against SouthernCare was the result of two qui tam suits filed by two former SouthernCare employees, Tanya Rice and Nancy Romeo, both registered nurses, who will receive $4.9 million as their share in filing the cases. The prosecutor in the case, Alice H. Martin, U.S. Attorney for the Northern District of Alabama is quoted as saying, "Our investigation showed a pattern and practice to falsely admit patients to hospice care who did not qualify and to bill Medicare for that care.
Thursday, January 15, 2009
United Health Group, Cuomo goes after United Health
Cuomo goes after United Health
Updated: 01/13/2009 09:26 PM
By: Erin Billups
NEW YORK STATE -- "I'm putting all the other healthcare insurance companies on notice today. This is the first step today with United," said Attorney General Andrew Cuomo.
After an investigation into allegations of unfair insurance reimbursement rates, United Health Group, one of the country's largest health insurers, has agreed to shut down its subsidiary, Ingenix, the nation's largest provider of health care billing information. Cuomo says Ingenix intentionally skewed the rates used when patients saw a doctor out of their coverage network.
"The system basically forced consumers to write a blank check to the doctor. They had no other guidance," Cuomo said.
Many large and small insurance providers use Ingenix, giving the company customer's billing information and all receiving the same reimbursement rate.
"Everyone bought into the system, everyone agreed, everyone has the same numbers. It was very difficult to detect," Cuomo said.
So customers would go to out-of-network doctors thinking they'd get, say, 80 percent back of what they were billed, only to find out that Ingenix would give back 10 to 28 percent less, calling that, the quote, usual and customary cost.
Mary Jerome, is being treated for advanced stage ovarian cancer. After she discovered her reimbursements were too low, she reported it to Cuomo's office.
"I felt like I had to battle twice, I had to battle cancer and I then felt I had to battle my insurance company,” said Jones. “It was almost too much to bear."
Now fewer people will have to bear that burden. United has also agreed to pay $50 million to a qualified nonprofit organization that will create a new independent database and reimbursement system. It will also develop a website where customers can find out, in advance, how much they'll pay before they go to the doctors.
But the investigation continues. Cuomo says one by one, they'll be investigating other insurance companies.
"I believe all these companies that have been involved with Ingenix, that there's a very strong case that they were perpetrating consumer frauds. And we are going to aggressively pursue those cases," Cuomo said.
In a press release, United Health's president said they're confident "the agreement will enhance the transparency of information" for consumers. But it seems this was just the tip of the iceberg.
Updated: 01/13/2009 09:26 PM
By: Erin Billups
NEW YORK STATE -- "I'm putting all the other healthcare insurance companies on notice today. This is the first step today with United," said Attorney General Andrew Cuomo.
After an investigation into allegations of unfair insurance reimbursement rates, United Health Group, one of the country's largest health insurers, has agreed to shut down its subsidiary, Ingenix, the nation's largest provider of health care billing information. Cuomo says Ingenix intentionally skewed the rates used when patients saw a doctor out of their coverage network.
"The system basically forced consumers to write a blank check to the doctor. They had no other guidance," Cuomo said.
Many large and small insurance providers use Ingenix, giving the company customer's billing information and all receiving the same reimbursement rate.
"Everyone bought into the system, everyone agreed, everyone has the same numbers. It was very difficult to detect," Cuomo said.
So customers would go to out-of-network doctors thinking they'd get, say, 80 percent back of what they were billed, only to find out that Ingenix would give back 10 to 28 percent less, calling that, the quote, usual and customary cost.
Mary Jerome, is being treated for advanced stage ovarian cancer. After she discovered her reimbursements were too low, she reported it to Cuomo's office.
"I felt like I had to battle twice, I had to battle cancer and I then felt I had to battle my insurance company,” said Jones. “It was almost too much to bear."
Now fewer people will have to bear that burden. United has also agreed to pay $50 million to a qualified nonprofit organization that will create a new independent database and reimbursement system. It will also develop a website where customers can find out, in advance, how much they'll pay before they go to the doctors.
But the investigation continues. Cuomo says one by one, they'll be investigating other insurance companies.
"I believe all these companies that have been involved with Ingenix, that there's a very strong case that they were perpetrating consumer frauds. And we are going to aggressively pursue those cases," Cuomo said.
In a press release, United Health's president said they're confident "the agreement will enhance the transparency of information" for consumers. But it seems this was just the tip of the iceberg.
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