The WellCare boardroom spat is far from over. 

Regina Herzlinger, who resigned from the board of long-troubled WellCare Health Plans, tells footnoted.org that she will soon file a response to the WellCare's board explanation in its 8-K of Herlizinger's departure from the board, where she served as head of the all-important audit committee. Recall that Herzlinger, a professor at Harvard Business School, resigned in protest of what she saw as a boardroom attempt to oust her. The board indeed declined to re-nominate her to her director position. 

Her resignation letter revealed what would appear to be a dysfunctional, faction-riven board. She wrote: "For years, news of my impending removal from the Board has filtered through the executive ranks, potentially seriously compromising my ability to discharge my oversight activities as Chair of the Audit Committee. Second, the NCG Committee ignored facially credible evidence of an improper voting agreement among certain directors, who comprised half of the NCG Committee, to take control of the Board. Third, it is likely that conspiring directors decided not to re-nominate me to the Board simply because of my vigorous and uncompromising pursuit of the interests of our shareholders and members." Her letter included a litany of accounting problems that reflects poorly on the company and the board. 

Obviously, personalities play a role in all this. Herzlinger quoted from a transcript of a 2008 conference call involving chairman Charles Berg, who is quoted as saying: "I have very little prospect that we can attract new great directors if one of the things they have to do is sit and deal with that woman." That woman?  

In its 8-K, the board says by not nominating her it was aiming for a better balance "between technical accounting and operational experience." It noted that it had recruited two new nominees for the audit committee, one who served as CFO of H&R Block and another who was vice chairman of the PricewaterhouseCoopers. The latter will head the audit committee. The company says there was no "agreement" among directors to oust her. 

Apart from the personalities, Herzlinger has raised some important issues about the company's accounting process. WellCare has had some massive, well-publicized problems. In 2007 and 2008, it was raided by state and federal authorities investigating Medicaid fraud. It ended up restating three years of results and paying $90 million. Since then, there have been a string of other incidents. 

"WellCare's internal auditor found that the company had yet again misstated capitation expenses, resulting in and overbilling the State of Illinois by $1 million. Similar and more significant problems arose with the accounting for (another program). An audit report on the Georgia Cash Disbursement Journal which found that the company had not met the requisite standards for documenting, communicating, and adhering to the guidance provided by the Department of Community Health resulted in a fine of $610,000 in 2009," Herzlinger noted. 

The company notes that it caught several issues internally and is working on them, while she wonders why the company continues to be saddled with these issues.

Ultimately, this dispute will likely recede. Herzlinger will not likely get her job back. What remains to be seen is if the new board will tackle some of the issues raised by her and instill confidence in shareholders that its rogue days are behind it. - Jim