Insurance giant Centene has been hit with another shareholder lawsuit, alleging company executives concealed financial concerns in its $6.8 billion acquisition of HealthNet.
Centene is already the subject of several shareholder lawsuits alleging the company’s top officials knew about HealthNet’s mounting liabilities. But the latest complaint, filed this week in U.S. District Court for the Eastern District of Missouri by several pension funds, adds new allegations that the insurer hid nearly $1 billion in tax liabilities and was the subject of a federal fraud investigation
According to the complaint (PDF), which names CEO Michael Neidorff along with nine other executives, Centene failed to disclose HealthNet’s potential tax exposure of more than $900 million tied to a California court ruling that increased the tax rate on insurance premiums.
Centene allegedly concealed the liability prior to the shareholder vote to approve the $6.8 billion acquisition of HealthNet in 2015. And the company failed to disclose the impact for more than a year, well after the merger closed.
“In fact, Centene did not disclose the existence of the litigation in its SEC filings until after an analyst specifically questioned Defendant Neidorff about the Company’s exposure at a conference in the Spring of 2016,” the filing states.
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The suit also claims Centene failed to investigate HealthNet’s alleged involvement in a Medicare fraud scheme that was under investigation by the Department of Justice. Health Net was later named in a lawsuit against UnitedHealth which is still working its way through the courts.
Centene has already faced legal and regulatory scrutiny for HealthNet’s failure to pay substance abuse treatment costs. As FierceHealthcare reported earlier this year, HealthNet was warned for the second time in as many years that it was violating state and federal laws by refusing to pay substance abuse treatment providers.
Centene did not return a request for comment.