- CEO Vivek Garipalli vigorously defended Clover Health in an expletives laden interview with Forbes.
Clover Health, an insurance company co-founded by Vivek Garipalli is facing ire from its short-sellers and investors, because of an ongoing investigation by the Securities and Exchange Commission and U.S. Department of Justice. The company was taken public last year, by Silicon Valley venture capitalist, Chamath Palihapitiya, through his SPAC group Social Capital Hedosophia. Forbes estimates that the SPAC listing brought Garipalli’s net worth to “at least $1billion.”
On Feb. 12, in an expletives laden interview with Katie Jennings, a staff writer covering healthcare for Forbes, Garipalli, 42, defended his embattled company. “It is the lowest-f*****g-cost product in every f*****g market,” Forbes quoted him as saying. “The most f*****g flexibility in every f*****g market. I’d die on a f*****g hill for our consumers. And you’re posting a f*****g article saying we’re not.”
Garipalli founded Clover Health in 2014. According to the company website, it has locations in eight states, including New Jersey, Tennessee, Pennsylvania and Texas. Prior to founding Clover, he founded CarePoint Health in 2008, a fully integrated healthcare system in New Jersey.
Forbes says Garipalli “is facing a confluence of existential threats to the insurance business,” as the DOJ, SEC and “influential short-sellers are all digging into Clover’s business practices, including how the company incentivizes doctors and patients to buy its insurance and use its technology.”
Forbes says that Garipalli’s meltdown was a result of an earlier article it posted on Feb. 12, about Clover Health’s federal investigation. The article mentioned the company, but did not mention Garipalli. Forbes says the article detailed how “Walgreens Boots Alliance was an investor in a Clover Health subsidiary called SeekMedicare.” The same day, Garipalli told Forbes that the headline — “Walgreens Revealed As Investor In Health Insurance Company Under Federal Investigation”— implied that Walgreens was a direct investor in Clover. Forbes says Garipalli “adamantly denied,” that, but did not disclose SeekMedicare’s ownership structure.
The reported Clover Health investigation comes after Hindenburg Research, an investment research firm, released a report on Feb. 4. “Today, we reveal how Clover Health and its Wall Street celebrity promoter, Chamath Palihapitiya, misled investors about critical aspects of Clover’s business in the run-up to the company’s SPAC go-public transaction last month,” the report said.
According to the report, Clover Health did not disclose that its business model and its software offering, called the Clover Assistant, are under active investigation by the Department of Justice (DOJ), “which is investigating at least 12 issues ranging from kickbacks to marketing practices to undisclosed third-party deals.”
The report mentions SeekMedicare, calling it Clover’s “thinly-disclosed subsidiary.” Adding that Seek makes no mention of its relationship with Clover on its website , the report says it misleads advertisers that it offers “independent” and “unbiased” advice on selecting Medicare plans. Its activities are also under investigation by the DOJ.
Clover Healthcare responded, noting that the company and Palihapitiya were aware of the DOJ investigation prior to the IPO. “To be clear, Clover doesn’t not believe it has, or has been, in violation of any rules or regulations related to the inquiry,”” Garipalli and Clover president and CTO Andrew Toy wrote in response. The duo acknowledged that Clover had received an inquiry from the SEC that they believed was a result of the Hindenburg report.
Palihapitiya took to Twitter saying, “Trust the process and the facts,” he wrote, and attached a screenshot of a longer statement. “Request for information and use it to paint a case of malfeasance and fraud is spurious,” he added.
Despite assurances from Garipalli and Palihapitiya, Forbes says “at least three class-action lawsuits were filed against the company in the past two weeks over the company’s failure to disclose this information.”