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TheStreet Open House

Directors, Execs See Green as WellCare Suffers

OKLAHOMA CITY -- Behind the scenes at scandalized WellCare (WCG), the company's former chairman exercises considerable control.

Neal Moszkowski served as WellCare's chairman until October 2006, when he shifted into a regular board seat and allowed then-CEO Todd Farha to take his place. With business booming, Moszkowski touted Farha's strengths and assured investors that they would "benefit greatly from Mr. Farha's continuing vision" as chairman and CEO.

Exactly one year later, government agents swarmed WellCare's Florida headquarters and brought the health insurer's glory days to an end. Moszkowski has gained fresh importance in the wake of that downfall.

He now heads both the special committee that is investigating the WellCare raid, and the compensation committee that decides how much the company's leaders should be paid. He chairs the company's corporate governance committee to boot.

WellCare's special committee is charged with uncovering any misconduct that led to the government's investigation and taking any necessary corrective actions. Almost four months have passed since October's raid, however, and the committee has so far prepared only a preliminary report on the matter. It has yet to share even that with the public, sending out mixed messages in the meantime.

Last month, based on the committee's findings, WellCare indicated that the company's problems could be confined to the small behavioral health unit of its Florida Medicaid division. For a national health insurer, focused on larger Medicare as well, such a narrow probe would seem like a nuisance at most.

Yet WellCare has responded in a dramatic fashion that suggests greater problems. In one sweeping move, the company ousted its top three executives and hired new leaders to execute its comeback.

WellCare declined to participate in this story, saying that it is granting no interviews and has no new information to share.

WellCare investors continue to suffer in the meantime. The company's stock, while boosted by the management shakeup, still languishes around $52, less than half of the $128 it traded at before raid.

Enticing Offers

WellCare's new leaders won't have to pinch their pennies, though.

With Moszkowski calling the shots, WellCare will continue to reward its management team quite well. Take a look at the company's contract with recently installed Executive Chairman Charles Berg, for example.

Berg already struck it rich in the health insurance arena by engineering Oxford's lucrative buyout by UnitedHealth (UNH) in 2004. He switched careers a few years later, joining a private-equity firm hungry for its own health care deals, and recently planted roots in upscale Westport, Conn.

As fate would have it, WellCare soon came calling with a job offer some 1,200 miles away. As executive chairman, Berg would not only lead the company's board but also assist the CEO with hands-on management of the company itself. Berg accepted the offer -- but only with the promise that he would not have to move.

Berg stands to earn plenty when making his long commute to Florida. In many ways, his compensation package outshines that offered to the full-time CEO. Berg's commitment is shorter. His salary is higher. And his stock options and restricted stock vest more rapidly.

All told, Berg will pocket a cool $1 million in salary -- or $500,000 per year -- for his 24-month stint at WellCare. He will also see 300,000 stock options and 200,000 shares of restricted stock vest completely by the time that he walks out the door.

WellCare's new CEO, Heath Schiesser, will have to wait a bit longer to collect all of his rewards. Still, Schiesser will make more in a month than he did in a full year at his former WellCare post. He has jumped from a part-time advisory position paying $24,000 a year to a CEO job paying "not less than $400,000" a year -- plus extras.

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