The chief financial officer of Blue Cross of California parent WellPoint Inc. was forced out after the company accused him of unspecified misconduct, the healthcare giant announced Thursday.
The sudden departure of David C. Colby, 53, a highly regarded executive within the managed-care industry and a darling of Wall Street, shocked investors and led to a 3.5% decline in the company's stock.
Colby, who was based in Thousand Oaks for years and still owns property in Southern California, was a key player in the merger that made Blue Cross of California, the state's largest health insurer, a part of Indianapolis-based WellPoint.
Colby resigned late Wednesday, days after concerns were raised about his personal conduct, the company said. The two top executives of WellPoint, in concert with its board of directors, asked an outside law firm to investigate the concerns upon learning of them, a spokeswoman said.
Based on that investigation, the board concluded that Colby had violated WellPoint's code of conduct and asked him to step down. He was immediately replaced by Wayne S. DeVeydt, who had served as chief accounting officer.
WellPoint officials declined to detail the nature of the allegations or circumstances that led to Colby's departure. In its news release, WellPoint said the probe "did not reveal illegal conduct, and the policy violations were in no way related to the business of WellPoint."
Colby could not be reached for comment. The company repossessed his corporate BlackBerry and several home telephone numbers associated with him either were no longer in service or rang unanswered.
WellPoint, one of the nation's largest health insurers, provides coverage for more than 7 million California residents through Blue Cross of California and Blue Cross Life & Health. Its California operations have come under harsh criticism recently for allegedly trying to boost the bottom line by dumping policyholders after they've submitted claims for costly medical care.
Also, last week, the California Department of Managed Health Care, which oversees HMOs in the state, said it was investigating a $950-million payment Blue Cross of California made to its corporate parent. Cindy Ehnes, the department's director, described the payment as excessive and said she was concerned that it might violate an agreement the company made to reinvest the bulk of premium revenue on medical care in the state.
Colby's departure is the latest in a series of high-profile corporate executive downfalls over alleged failings outside the office. Harry Stonecipher left his post as Boeing Co. chief executive two years ago after having an affair with a subordinate. Hewlett-Packard Co. ousted Patricia Dunn as chairwoman last year after she approved of the use of false identities to probe news leaks. And last month HBO dismissed CEO Chris Albrecht after he was accused of assaulting his girlfriend in a drunken rage outside a Las Vegas casino.
WellPoint's shares fell $2.99 to $81.41 on Thursday.
Colby had been repeatedly named a top financial officer in the industry by an investor publication, and he helped forge the $16.4-billion deal that created one of the nation's most dominant health insurers almost three years ago.
He was an executive at Thousand Oaks-based WellPoint when Indianapolis-based Anthem Inc. purchased it and took its name. The consolidation, widely criticized by consumer advocates for its financing costs and executive payouts, gave the new WellPoint a foothold in 14 states.
Colby's annual salary was $704,000. Only two months ago he was promoted, receiving the additional title of vice chairman. At that time he was awarded stock options and shares then valued at $1.6 million.
Wall Street analysts viewed him as an important anchor for the company, which was preparing for the retirement of CEO Larry Glasscock and the ascent scheduled for today of general counsel Angela F. Braly to succeed him. Glasscock will remain chairman.
In a short conference call Thursday, Glasscock declined to reveal any details about what led to Colby's exit.
"Certain concerns were raised, and we immediately began an investigation," Glasscock said. "Based on this investigation, it was concluded that David Colby violated the company's code of conduct."
Colby still owns a home in the exclusive golf community of Lake Sherwood.
The company gave no clue as to what part of its ethics code Colby is alleged to have violated.
The company's 25-page code of conduct is posted on its website, along with a toll-free telephone number that tipsters can use anonymously.