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Clover Well being, supported by Chamath Palihapitiya, is knowledgeable of the SEC investigation

Chamath Palihapitiya

Olivia Michael | CNBC

Chamath Palihapitiya-sponsored Clover Health Investments announced Friday that it has received an investigation from the Securities and Exchange Commission and that it intends to work together.

However, Clover backed out of a critical report by the short seller Hindenburg Research, saying some of the claims in the report were "totally false".

On Thursday, Hindenburg published a damning report, the title of which called Clover Health a "broken business." The insurance company's stocks fell more than 12%, the largest daily percentage decline in four months. Clover's shares rose more than 3% on the Friday leading up to trading after the company released its response. Hindenburg, which has posted short selling in the past, said Thursday it had no position in Clover.

Hindenburg also said that Clover has been investigated by the Justice Department and the investigation has not been disclosed to investors. In his response to the Hindenburg report on Friday, Clover said he had received inquiries from the DOJ but did not believe the inquiries were material to his investors. The company characterized the DOJ inquiries as standard practice because Clover works with the Medicare system.

Clover said it decided not to disclose the DOJ's requests after consulting with its attorneys. The company didn't say what the DOJ's inquiries were about. On the SEC side, Clover said he received the agency's letter Thursday after the Hindenburg report was released. The company said it was unaware of any investigation outside of the SEC's letter it received Thursday.

The DOJ on Thursday declined to comment on any possible investigation or investigation related to Clover.

In addition to the alleged investigation, Clover responded to Hindenburg's criticism of a separate company called Seek Insurance, which shares investors and governance with Clover. Hindenburg claims that Seek Insurance, a website designed to help people find Medicare plans, does not disclose its relationship with Clover, despite the fact that their website stands out as an unbiased platform for choosing a health plan. Clover said in his response that Seek Insurance is a subsidiary of Clover but is still an independent start-up.

Clover also said that Seek's website would be updated with more information soon, and released a breakdown of the plans Seek customers are choosing. According to Clover, 13.5% of Seek customers chose a Clover plan, behind CVS / Aetna (17%), Humana (20%) and Cigna (20%).

Finally, Clover responded to Hindenburg's claims that the company's software was causing doctors to charge the Medicare system more than necessary, a practice called "upcoding." According to Hindenburg, Clover's software encourages up-coding with "irrelevant diagnoses" to "deceive" and charge the Medicare system more. Clover denied these allegations in his response, saying that doctors receive a flat fee for an office visit and that it is up to the doctor to choose the diagnosis.

Read all of Clover's in-depth point-by-point answers on Hindenburg here.

–Reuters contributed to this report.

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