ST. LOUIS (Legal Newsline) – Current and former directors and officers of Centene Corp. have been sued over allegations of securities fraud by the Carpenters Pension Fund and Iron Workers 11 Pension Fund in a federal court.
In the 95-page complaint filed Dec. 14 in the U.S. District Court Eastern District of Missouri, the plaintiffs allege the executives committed fraud in relation to the merger of Centene with Health Net. The suit states the merger was worth $6.8 billion and was completed on March 24, 2016, with Centene paying $78.59 per share of Health Net stock.
However, the plaintiffs allege that the executive defendants went ahead with the merger without fully disclosing what they allege were “significant problems” with Health Net to stockholders.
These alleged problems included the fact that Health Net owed almost $1 billion in back taxes to the state of California. Additionally, Health Net was facing $200 million in lawsuit claims over allegations it refused to pay claims substance abuse treatment centers, as well as losses of $1 billion due to “poorly designed and unprofitable insurance products sold in California,” the suit states.
The plaintiffs also argue that Centene Corp. officials “failed to prevent and correct known securities fraud violations and false financial reporting."
They allege that because of the actions of the officials, Centene stock prices dropped $6.39 a share for a loss of 8.5 percent of its value and “erasing $1 billion of stockholder value on high trading volume” in July 2016.
The plaintiffs seek a declaration that the defendants have breached their fiduciary duty, directing Centene to take actions to reform and improve its corporate governance, interest, costs and other relief the court deems just. They are represented by Hartnett Gladney Hetterman LLC in St. Louis and Cohen Milstein Sellers and Toll in Chicago and Washington, D.C.