By Matthew Holt

Everyone’s favorite Harvard Business School professor is back in the news. Those of you with long memories may remember that at THCB I’ve been a tad critical of Regina Herzlinger’s ideas, her presentation of said ideas and—resulting in a letter from her lawyer whose previous gig was writing the Patriot Act—her stewardship of the shareholders and other stakeholders of Wellcare. Wellcare is a pretty scummy Medicare and Medicaid HMO in Florida. The scuttlebut I heard about Wellcare a few years back was that it was hiding money offshore in some weird re-insurance arrangement with a fully owned subsidiary, and was essentially faking profits a la Enron.

While that may or may not have been exactly accurate, Wellcare was certainly overcharging its client, the taxpayer in Florida. It was raided by the FBI and eventually settled with the state.

What did one of its best known directors says when she joined the board in 2003?

Dr. Herzlinger said, “WellCare is a case study of a successful public-private partnership, and a model for delivering quality affordable healthcare. Over the years to come, companies like WellCare that reach out to members with information, wellness planning and screenings will be agents of change in the delivery of managed care under government programs.

So by late 2007 Herzlinger had been on the board for four years. What had been her major achievement given the the close-to-criminal activity that was going on the company? Oh yes, it was selling nearly $2.3m worth of stock—completely coincidentally—three months before the FBI raid when the stock was worth 5 times what it fell to shortly afterwards.

And then early last year (2009) Wellcare was suspended from Medicare sales for more bad behavior. Did Regi resign at that stage? Uh….no.

But on Friday she actually did quit!

Why? She claims that she was asking difficult questions about their internal accounting processes and low MLR rate—below the newly enforceable (in 2014) 85%. But amazingly just coincidentally Wellcare apparently didn’t want her back on the board for another term. So maybe she was just using the time honored employee tactic of saying “You can’t fire me, I quit.”

So that now that she’s no longer restrained by whatever loyalty she felt to Wellcare’s shareholders, I look forward to her commenting on the situation over the past seven years, as her lawyer said that she (and he) would. Given that, as her lawyer wrote to me, “responsible directors” hold on “to significant numbers of their shares…—a practice that ensures that their incentives are aligned with the interest of shareholders” is she going to explain why she sold the stock when she did, and why it took until this year for the misbehavior at Wellcare to suddenly be bad enough for her to feel the she was morally obliged to quit? And how much stock does she have left and what is she going to do with that?

I for one am really looking forward to her explanation. But some of the hints are in her rather fun resignation letter which at least hints that she was having trouble with the management (and vice-versa) from January 2008, a few months after the raids and the stock collapse.