A federal judge has largely rejected Alignment Healthcare’s bid to throw out a former senior executive’s whistleblower lawsuit that accuses the Medicare Advantage insurer of financial mismanagement.
Alignment’s former chief technology officer, Hakan Kardes, PhD, alleged in July that he was pushed out of the company after reporting that it had misclassified $8 million to $10 million in operating expenses as capital expenditures in 2024 to inflate its profits and trigger bonuses for executives.
In its motion to dismiss the lawsuit, the company argued that Dr. Kardes, a computer scientist by training, voluntarily resigned and missed the legal deadline to file his complaint. The insurer also said that his internal communications about the expense classifications were routine budget discussions, not reports of fraud.
On Oct. 5, U.S. District Judge Fred Slaughter of the Central District of California disagreed on both points, finding the record did not show the claim was filed too late, and that someone in Dr. Kardes’ position could reasonably believe the expense misclassification was driven by the company’s push to reach positive adjusted EBITDA. The judge did dismiss retaliation claims made against Alignment’s CIO and CHRO. He also denied Alignment’s request to sanction Dr. Kardes’ attorneys, finding the lawsuit was not frivolous.
In a statement shared with Becker’s, Alignment said the ruling “is a procedural step, not a determination on the merits,” noting the court “expressly stated that it isn’t taking a stance on the ultimate merits of Kardes’ claim.”
“Alignment Healthcare continues to believe the allegations in Mr. Kardes’ lawsuit are wholly without merit, intends to defend itself vigorously and is confident it will prevail,” a spokesperson for the company said.
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