Is WellCare a bargain during a federal investigation?

Shares of WellCare Health Plans (NYSE: WCG) rebounded more than 21% on Monday, after tanking for the past couple weeks on news that federal agents raided the company's headquarters. Reports have suggested that the raid was related to the company's overstating of the amount it spent on mental health services, thereby defrauding the government out of millions of dollars. For now, these are only rumors and allegations.

The Wall Street Journal's "Heard on the Street" column (subscription required) suggests that the plunge may have been spurred in part by quant funds dumping, and could even be an opportunity. Of course no one knows what will happen, but this is not a line of logic that I like.

True, the concrete damages could be limited. But what the issue does is raise grave questions about the company's management, internal controls, and corporate culture. There is no finite value that you can put on that, and owning a company where those things are in question is probably a mistake.

There could be more skeletons to be unearthed here, so I wouldn't go diving into WellCare. Uncertainty can spell opportunity, but not when it involves the integrity of the company's management.