Health Net 2000 Annual Report Download - page 52

50 HEALTH NET 2000 Annual Report
PacifiCare Operations, Inc. and Foundation Health
Systems, Inc.The plaintiff alleges that the manner in
which the defendants contract and interact with its mem-
ber physicians violates provisions of RICO.The action
seeks declaratory and injunctive relief, as well as costs and
attorneys fees.The Company filed a motion to dismiss
the action on various grounds. In August 2000, plaintiffs
in other actions pending against different managed care
organizations petitioned the Judicial Panel on Multi-
District Litigation to consolidate the California action
with the other actions in the U.S. District Court for the
Northern District of Alabama. In light of the pending
petition, the California court stayed the action and the
hearing on the Company’s motion to dismiss the com-
plaint for ninety days pending a determination of the
petition to consolidate. On October 23, 2000, the Judicial
Panel on Multi-District Litigation ruled that this case
should be consolidated, for purposes of pre-trial proceed-
ings only, with other cases pending against managed care
organizations in the United States District Court for the
Southern District of Florida in Miami.The Company
intends to vigorously defend the action.
The Company and certain of its subsidiaries are also
parties to various other legal proceedings, many of which
involve claims for coverage encountered in the ordinary
course of its business. Based in part on advice from litiga-
tion counsel to the Company and upon information
presently available, management of the Company is of the
opinion that the final outcome of all such proceedings
should not have a material adverse effect upon the
Company’s results of operations or financial condition.
Operating Leases
The Company leases administrative office space under
various operating leases. Certain leases contain renewal
options and rent escalation clauses.
On September 30, 2000, Health Net of California,
Inc. entered into an operating lease agreement to lease
office space in Woodland Hills, California for substantially
all of its operations once its current office lease expires.
The new lease is anticipated to commence on January 1,
2002 for a term of 10 years.The total future minimum
lease commitments under the lease are approximately
$96.7 million.
Future minimum lease commitments for noncancel-
able operating leases at December 31, 2000 are as follows
(amounts in thousands):
2001 $ 47,126
2002 40,764
2003 29,183
2004 22,915
2005 16,199
Thereafter 82,153
Total minimum lease commitments $238,340
Rent expense totaled $49.8 million, $49.0 million
and $50.3 million in 2000, 1999 and 1998, respectively.
NOTE 13 – Related Parties
One current director of the Company was a partner in
a law firm which received legal fees totaling $0.3 mil-
lion, $1.2 million, and $1.0 million, in 2000, 1999, and
1998, respectively. Such law firm is also an employer
group of the Company from which the Company
receives premium revenues at standard rates. One cur-
rent director was an officer of IBM which the
Company paid $16.7 million, $9.0 million and $8.0 mil-
lion for products and services in 2000, 1999 and 1998,
respectively, and one current director is also a director
of a temporary staffing company which the Company
paid $1.9 million, $11.0 million and $20.4 million in
2000, 1999 and 1998, respectively.
A director of the Company was paid $70,000, and
$25,000 in consulting fees in 2000 and 1999, respectively,
due to various services provided to the Company in con-
nection with the closing of its operations in Pueblo,
Colorado (see Note 15). In addition, two of this director’s
law firm partners purchased a building from the
Company in Pueblo, Colorado, for $405,000 in 1999.
During 1998, three executive officers of the
Company, in connection with their hire or relocation,