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Health Net Hit With $117 Million Judgment in Fraud Case

Health Net Inc., the Woodland Hills-based health maintenance organization, was hit Friday with a $117 million judgment in a case accusing it of fraud in the 1999 sale of three health plans.


A Louisiana jury awarded $52.4 million in compensatory damages and $65 million in punitive damages in a lawsuit brought by the receivers of three former Health Net subsidiaries that went bankrupt in 2002, three years after their sale to Houston-based AmCareco Inc.


The receivers sued AmCareco, Health Net, and other parties charging them with fraud, negligence, conspiracy, and breach of fiduciary duty among other claims. Friday’s judgment only involved the sale of Health Net’s former Texas health plan.


The other two cases, involving plans in Oklahoma and Louisiana, are being tried by a Texas judge. The plaintiffs in those cases are seeking about $30 million in compensatory damages along with punitive damages.


Health Net plans said it disagreed with the jury’s decision and planned to appeal the judgment, which it would partially share. The jury said other parties must pay 15 percent of the compensatory damages.


“The plaintiffs attempted to reach back to the original sale. It took three years to happen when we weren’t involved,” said David Olson, senior vice president of corporate communications for Health Net.

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