Fla. Jury Awards $22 Million for Fraud in October 2000 Purchase of HMO

June 30, 2005

A jury in Broward County Court has awarded a $22 million verdict after finding a fraudulent scheme of intentional misrepresentation and the illegal hiding of key financial information in connection with the October, 2000 purchase of HIP of Florida, now Vista Health Plans of Florida.

The jury also decided that the plaintiff did not have to repay a $16 million note to the defendant, making an effective verdict of $38 million. The jury also found against the defendants on several other theories; negligent misrepresentation, breach of contract, unjust enrichment, and breach of good faith and fair dealing.

The jury is now considering punitive damages, also before Broward Judge Thomas Lynch IV. The jury’s decision also has important implications for the public.

“HIP of Florida almost collapsed after the (2000) closing (of the sale) when the hidden costs started coming to light,” said Belinda Miller, Deputy General Counsel of the Florida Department of Insurance, the plaintiff’s first witness. “It would have been a catastrophe for over 200,000 HMO members but for the fact that Dr. Scott stepped up and poured in tens of millions of unexpected dollars to rescue it.”

“This is a victory for our healthcare providers and members,” said physician and businessman Dr. Steven Scott, CEO for the plaintiff company.

The verdict was against HIP of New York. Led by Chairman and CEO Anthony “Tony” Watson, the company is one of the largest HMOs in New York.

In October, 2000, Scott’s company purchased HIP of Florida — now VISTA Health Plans of Florida — for $40 million. The purchase was approved by the Florida Department of Insurance.

Plaintiff’s lead attorney Ken McNeil of Susman Godfrey LLP said, “This is an important signal by an American jury for HMOs to carefully protect their members in America.”

Plaintiff’s co-counsel William Scherer Jr. of Conrad & Scherer LLP said the true hidden financial condition of the HIP of Florida — the fifth largest HMO in Florida with 220,000 members — could have caused a major disruption of healthcare service throughout the state.

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