Bloomberg News

Amerigroup Must Pay $334 Million for Denying Coverage

March 14, 2007

Amerigroup Corp., (AGP:US) a manager of government health plans for the poor, must pay $334 million for wrongfully denying coverage to pregnant women eligible for Medicaid.

U.S. District Judge Harry Leinenweber, in a ruling filed today in Chicago, assessed the Virginia Beach, Virginia-based company a $190.4 million penalty on top of the $144 million in damages awarded against the company last year in a whistleblower lawsuit. The damages are the most ever in a federal healthcare fraud case in Chicago federal court, prosecutors said in a statement.

Amerigroup contracted with the state of Illinois to provide services to Medicaid patients. The whistleblower, who was in charge of government relations for the company in Illinois, filed the complaint in 2002 after he was fired. He 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.

``Amerigroup strongly disagrees with this decision and will aggressively pursue an appeal,'' Chief Executive Officer Jeffrey McWaters said in a statement. ``We believe that our Illinois subsidiary acted at the direction and with the knowledge of the Illinois Department of Public Aid.''

A Chicago federal jury last October awarded $48 million in damages to the plaintiffs, which include the U.S. government, Illinois and the former employee who sued. That amount was tripled under federal law. The judge based the additional penalty on the about 18,000 instances of fraud found by the jury.

``We are pleased that the evidence we presented persuaded not only the jury but now the judge as well that Amerigroup's misconduct was egregious and calculated,'' said David Chizewer, a lawyer for the plaintiffs.

Amerigroup shares fell 69 cents to $32.05 in New York Stock Exchange composite trading.

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: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

To contact the editor responsible for this story: Patrick Oster at poster@bloomberg.net and; Robert Simison at rsimison@bloomberg.net.


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