- The Washington Times - Wednesday, August 18, 2004

QuadraMed Corp. begins trading this morning on the American Stock Exchange, marking the comeback of a

Reston company that has weathered a fraud investigation, shareholder lawsuits and a brush with bankruptcy.

The health care technology company began trading under the ticker symbol “QD.” It’s the second time that QuadraMed shares have been widely available on Wall Street.

The company, which recently was traded on the OTC Bulletin Board, was kicked off the Nasdaq Stock Market in March 2003 after not acting quickly enough to restate several years of financial statements that were fraught with accounting problems.

The delisting was only part of a larger crisis that Quadra-Med Chief Executive Officer and Chairman Lawrence P. English has quelled in the past four years. The company has faced a fraud investigation by the Securities and Exchange Commission, shareholder lawsuits, rotating chief financial officers and slew of accounting problems. It has emerged debt-free with an expanded work force.

QuadraMed, with 980 employees, has about 2,000 health care customers after its recent acquisition of Florida software company Tempus Software. Qua-draMed paid $13.4 million in cash and stock for Tempus.

“This feels like my greatest accomplishment,” Mr. English said earlier this week. He was scheduled to ring the opening bell this morning at the Amex building in New York to begin trading and mark QuadraMed’s comeback.

But there were times when it seemed as if the company would go under, said Dave Francis, analyst at New York investment bank Jefferies & Co. Inc., who used to monitor QuadraMed.

Mr. Francis, who would not say whether he will cover the stock again, said the company survived because “the problems were more or less financially related from the previous management team and not product-related. QuadraMed’s products are actually some of the most recognized names in the health care market.”

QuadraMed sells software and services that help hospitals and health care providers manage clinical and patient information, billing cycles and other patient care services.

Most of QuadraMed’s problems arose from its accounting practices during a rapid expansion during the technology boom from 1997 to 1999. During that time, the company, under previous management, made 27 acquisitions.

But QuadraMed’s expenses were climbing, because the companies were not beingsuccessfully merged into one operation, said Mr. English, 64, who has a background in the health care industry and turning around struggling companies.

When he came to the company in June 2000, Quadra-Med had racked up $115 million in debt. Almost all of the previous management left before or shortly after Mr. English took charge.

Still, real problems did not show up until July 2002, when theEnron, WorldCom and Tyco scandals rocked the stock market. QuadraMed’s new auditing firm, PricewaterhouseCoopers, raised serious questions about the accounting methodsused during the company’s acquisition period.

Mr. English hired forensic accountants to delve into the records only to find that the company’s auditor had been Arthur Andersen LLP, an international accounting firm that was brought down by the Enron scandal.

“That triggered a need to restate several years of earnings,” Mr. English said.

The restatement announcement prompted a fraud investigation by the SEC, which said QuadraMed had inflated its revenue in 1998 and 1999 by essentially paying for the purchase of its own products.

The investigation was settled in May with a cease-and-desist order from the SEC. Quadra-Med was not fined or forced to admit any wrongdoing.

At the same time, Mr. English and the board of directors were hit with several shareholder lawsuits. Additionally, Nasdaq had begun its process of delisting QuadraMed in August 2002.

The company was kicked off Nasdaq in March 2003 after it failed to have restated quarterly financial statements for shareholders. The delisting required QuadraMed to pay back $70 million in bonds to investors within 45 days. But the company couldn’t meet the deadline.

“At that point, the board, which had been very supportive, was ready to form a bankruptcy council,” Mr. English said. But he persuaded the board to hold on while striking a deal with investors to keep the company operating.

The fewer than 20 bondholders restructured QuadraMed’s finances to have $80 million in new debt. In return, they were given 30 percent of the company’s equity. The company later sold $100 million worth of shares to pay off the remaining debt.

Now with a clean slate, Mr. English said he refuses to make any profit or sales projections.

“Managers should not manage the stock price; they should manage the business,” he said.

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