AMERIGROUP Reaches Agreement in Principle to Settle Illinois Qui Tam Litigation
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AMERIGROUP Corporation announced today that it has reached a comprehensive settlement agreement in principle that will conclude its civil qui tam litigation relating to certain marketing practices of the Company’s former Illinois health plan. The agreement in principle is subject to the completion of definitive settlement documentation by the parties.
In 2007, the Court had entered a judgment against the Company and its Illinois subsidiary of approximately $334 million, plus the fees of the Relator’s counsel. Under the terms of the proposed settlement, the Company will pay $225 million to the United States and the State of Illinois, plus approximately $9 million in legal fees, and will not admit any wrongdoing. Additionally, in connection with the settlement, the Company will enter into a Corporate Integrity Agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services.
“We are concluding this litigation now to remove a source of significant legal and financial uncertainty for our organization. With this matter resolved, we can concentrate fully on the business at hand — meeting the healthcare needs of our members and continuing to serve our government partners,” said James G. Carlson, AMERIGROUP Chairman and Chief Executive Officer. “Our responsibility to our shareholders, associates, members, providers and government partners is to close this chapter now and move toward the future.”
The Company will report a one-time charge for the settlement of approximately $199 million net of the estimated tax benefit, in the second quarter ended June 30, 2008. The Company will pay the settlement from restricted funds previously established to cover costs related to the judgment. Following the payment, which is expected to occur during the third quarter of 2008, the Company’s unrestricted cash balance will increase by approximately $117 million due to the release of excess restricted funds. These funds will be available for general corporate purposes. The Company will also be favorably impacted by estimated tax benefits of approximately $35 million.
The Company will provide full-year 2008 earnings guidance in its previously scheduled second quarter earnings release on Wednesday, July 23, 2008.
Unrelated to this case, AMERIGROUP Illinois voluntarily ended its contract with Illinois in 2006 and no longer operates in that State. The Company also has expanded its corporate compliance program significantly to fully ensure compliance with state and federal regulations in its health plans.
Source: AMERIGROUP Corporation
