Medicaid Suit Mangles Amerigroup

Right now, Amerigroup barely has enough unrestricted cash to pay the $144 million penalty alone.

For its part, Amerigroup continues to defend its practices. The company claims that "a number of the court's rulings constitute reversible error and impacted the jury's findings." It also calls the court's instructions about individual claims -- which could more than double the ultimate damages -- "improper and unprecedented." It has announced plans to appeal.

Still, Amerigroup could take a huge financial hit in the end.

"The company had over $150 million in cash at the end of the quarter, so AGP would likely have to incur debt to pay the penalty if its appeal is unsuccessful," CIBC World Markets analyst Carl McDonald wrote on Tuesday. Meanwhile, "the verdict will require the establishment of a reserve for at least a portion" of the damages.

McDonald has an underperform rating on Amerigroup's stock. His firm hopes to secure investment banking business from the company over the next three months.

Amerigroup had previously established no reserves for the case at all.

Originally, a company whistleblower and his law firm pursued the case without any government assistance. Many whistleblower cases falter in such situations. But attorneys at Chicago-based Goldberg Kohn, which filed the case several years ago, say they methodically collected convincing evidence -- including damaging emails -- that persuaded the government to change its mind and join the case in the end. Those lawyers feel that same evidence will serve them well in fighting the company's appeal.