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NEW FROM US: Clover Health: How the “King of SPACs” Lured Retail Investors Into a Broken Business Facing an Active, Undisclosed DOJ Investigation
cc @chamath
https://hindenburgresearch.com/clover/ $CLOV
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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. $CLOVpic.twitter.com/Pvy8ZaPZJ8
Our investigation into $CLOV has spanned 4 months & more than a dozen interviews with former employees, competitors & experts, dozens of calls to doctor’s offices & a review of thousands of pages of government reports, insurance filings, regulatory filings & marketing materials.
$CLOV has not disclosed that its business and its software, called Clover Assistant, are under investigation by the DOJ, which is investigating at least 12 issues from kickbacks to marketing practices according to a Civil Investigative Demand (similar to a subpoena) we obtainedpic.twitter.com/HAfeOefUKY
This Civil Investigative Demand and the corresponding investigation present a potential existential risk for a company that derives almost all of its revenue from Medicare, a government payor. Our research indicates that the investigation has merit. $CLOV
$CLOV claims that its best-in-class technology fuels its sales growth. We found that much of Clover's sales are driven by a major undisclosed related party deal and misleading marketing targeting the elderly.
These practices should not come as a surprise, given that in 2016, $CLOV was fined for misleading marketing practices by the Centers for Medicare & Medicaid Services (CMS).
The fine was issued after Clover's repeated failure to amend misleading statements about plan offerings.pic.twitter.com/Hp7lgZgVte
$CLOV has a thinly-disclosed subsidiary called "Seek Insurance". Seek makes no mention of its relationship with Clover on its website yet misleadingly advertises to seniors that it offers "independent" and "unbiased" advice on selecting Medicare plans.pic.twitter.com/OYBGzQQEwe
Seek's website claims “We don’t work for insurance companies. We work for you”, despite literally being owned by $CLOV, an insurance company.
Its activities are also under investigation by the DOJ.pic.twitter.com/9E0q5D59T1
In case there is any doubt that Seek is an extension of $CLOV's sales operation, Florida corporate records show that Seek’s Chief Sales Officer is Hiram Bermudez, who concurrently serves as Clover’s Head of Sales.
http://search.sunbiz.org/Inquiry/CorporationSearch/ConvertTiffToPDF?storagePath=COR%5C2020%5C0506%5C00129091.Tif&documentNumber=F20000002088 …pic.twitter.com/G642QiTEmM
Multiple formers explained much of $CLOV's sales are fueled by a major undisclosed relationship between $CLOV & an outside brokerage controlled by $CLOV's Head of Sales, Hiram Bermudez.
One estimated Bermudez drove ~68% of total sales.pic.twitter.com/93b51Rkdm4
The former employees explained that $CLOV's Head of Sales took efforts to conceal the relationship by putting it in his wife's name “for compliance purposes”.
Insurance filings confirm this. The contract was put into his wife's name weeks after Clover's go-public announcement.pic.twitter.com/ppKEbycm4X
In a CNBC interview about $CLOV, Chamath proclaimed, unprompted, "they create transparency...they don't motivate doctors to upcode or do all kinds of things in order to get paid"
A former employee told us the DOJ is specifically asking about upcoding, or overbilling Medicare.pic.twitter.com/kghmcPm8hx
Multiple former employees explained $CLOV's software is primarily a tool to help the company increase coding reimbursement.
We provide detail on how the software captures & retains irrelevant diagnoses, which we believe deceives the healthcare system & poses a regulatory risk.
$CLOV claims its software “delights” physicians, but according to doctors and former employees we interviewed, they use it because Clover pays them extra to use it.
Physicians are paid $200 per visit to use the software, twice the normal reimbursement rate for a Medicare visit.pic.twitter.com/dnSoEgxbKP
Doctors at key Clover providers described the software as "embarrassingly rudimentary", “a waste of my time” and as just another administrative hassle to deal with.
$CLOV CTO left 6 months before the first release of the supposed "disruptive" Clover Assistant software in July 2018 (likely a sign that development wasn’t going great.)
Clover’s executive team has been in turmoil, with 3 CFOs, 3 COOs, and 2 General Counsels in the last 4 yearspic.twitter.com/Q0C3vtcpgF
Prior to founding Clover, CEO Vivek Garipalli owned 3 New Jersey hospitals through a company called CarePoint Health. CarePoint was publicly lambasted for price-gouging; its Bayonne Medical hospital charged the highest prices for emergency room treatment in the entire country.pic.twitter.com/DsPYCzqi9j
CarePoint’s predatory price-gouging was lucrative. But in 2020, New Jersey legislators accused Garipalli – now a public company CEO - of siphoning over $157m from his hospital network through a web of shell entities. The transactions left the hospitals financially crippled.pic.twitter.com/aJUwEoY4tu
Meanwhile, @chamath has described Garipalli as "an absolute proven moneymaker".
That could be because Chamath’s firm received over 20 million “founders shares” (worth ~$290 million at current prices) in exchange for $25,000 and for promoting the $CLOV SPAC.pic.twitter.com/Odh8o8jDRw
Given that investors are paying over a quarter billion dollars for @chamath's due diligence, we think they deserve to know whether Chamath knew of these issues at $CLOV and concealed them, or whether he simply failed to notice them at all.https://hindenburgresearch.com/clover/
Short sellers have exposed almost every major market fraud in the past several decades, yet there have been recent questions about whether they play an important role in a healthy, functioning market. We hope our research today serves as a timely reminder that they do.
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