Bloomberg News

Amerigroup Defrauded U.S., Must Pay $144 Million

October 30, 2006

Amerigroup Corp. (AGP:US), which manages government health plans for the poor, must pay at least $144 million in damages for wrongfully denying coverage to pregnant women eligible for Medicaid, a jury found.

The jury today awarded the plaintiffs, which included the U.S. and Illinois governments and a whistleblower former employee, $48 million. That amount will be tripled under federal law. The company may also be liable for a total of as much as $199 million in penalties for more than 18,000 instances of fraud found by the federal jury in Chicago.

``They were getting paid for serving people they weren't in fact serving,'' private attorney Fred Cohen of Chicago said after the verdict.

Amerigroup contracted with Illinois to provide services to Medicaid patients. Cohen's client, Cleveland Tyson -- who was in charge of government relations for the company in Illinois -- filed the suit four years ago, after he was fired. Tyson accused the company, which has operations in nine states and the District of Columbia, of maximizing its profit by keeping pregnant women and others with expensive medical conditions off its rolls.

The case was filed under the federal False Claims Act and a parallel state law. The panel of four men and three women deliberated for less than six hours before returning its verdict, ending a three-week trial.

``We respectfully, but strongly, disagree with the jury's finding, and we will appeal,'' Amerigroup spokesman Kent Jenkins said outside the courtroom.

Eighth-Largest Verdict

The verdict is the eighth-largest jury award in any trial in 2006, according to data compiled by Bloomberg. The largest, for $699.5 million, came in August in a contract dispute over the building of natural-gas processing plants in Louisiana.

``This is not a case that the company should have taken to trial,'' said Patrick Burns, spokesman for Taxpayers Against Fraud, a Washington non-profit group that tracks such cases.

Under federal law, the company could be barred from future government contracting, Burns said.

``Today's verdict sends a strong message that companies who contract with the State of Illinois to provide healthcare to its neediest residents cannot discriminate against those residents who need care the most,'' Illinois Attorney General Lisa Madigan said in a statement today.

The company stopped doing business with the state in August for reasons unrelated to the lawsuit, Jenkins said.

The company estimates its 2006 revenue will be $3 billion, Jenkins said. Amerigroup took in $2.3 billion in 2005, he said.

Amerigroup's shares rose 67 cents to $35.41 at the close of New York Stock Exchange composite trading today.

The lawsuit is U.S. ex rel. Tyson v. Amerigroup Illinois Inc., No. 02-C-6074, in the Northern District of Illinois, Eastern Division (Chicago).

To contact the reporter on this story: Margaret Cronin Fisk in Southfield, Michigan, at 2947 or mcfisk@bloomberg.net.

Andrew Harris at the federal court in Chicago, at 5474 or aharris16@bloomberg.net

To contact the editor responsible for this story: Patrick Oster at poster@bloomberg.net.


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