Former UnitedHealth CEO Agrees To Settle Lawsuit
Former UnitedHealth Chair and CEO William McGuire on Thursday agreed to settle a $468 million civil enforcement action filed by the Securities and Exchange Commission over allegations that he signed documents to award himself and other company officials backdated stock options, USA Today reports (Iwata, USA Today, 12/7).
McGuire in October 2006 agreed to resign after the release of an internal investigative report that found he likely received backdated stock options. McGuire resigned as chair immediately and later resigned as CEO. Then-UnitedHealth Chief Operating Officer Stephen Hemsley replaced McGuire as CEO. The report found that 1.5 million stock options, most of which McGuire received from his 1999 contract, were "likely backdated" (California Healthline, 11/9/06).
Under the settlement, in which McGuire will not admit any wrongdoing, he will disgorge gains of $11 million, pay a $7 million civil fine and reimburse UnitedHealth about $448 million of all retirement and executive savings benefits that he received from 2003 through 2006. McGuire also cannot serve as an officer or director of a publicly traded company for 10 years (USA Today, 12/7).
According to the New York Times, the settlement, which marks the "first time regulators have successfully employed corporate governance rules put in place after the collapse of Enron," will allow McGuire to retain stock options valued at more than $800 million (Dash, New York Times, 12/7).
Separately, McGuire on Thursday agreed to return to UnitedHealth $320 million in stock options and $99 million in retirement and executive savings benefits to settle a lawsuit related to the backdated stock options that he allegedly received. He previously had returned $200 million to UnitedHealth (Murakami Tse, Washington Post, 12/7).
The settlement, which requires approval by a federal judge and a state judge, will resolve "all of the company's negotiations with Dr. McGuire over his options and exit package, which had been on ice since his departure," the Wall Street Journal reports (Fuhrmans/Bandler, Wall Street Journal, 12/7). According to individuals familiar with the situation, the settlement with UnitedHealth will satisfy all of the requirements of the agreement with SEC except the $7 million in civil fines (Washington Post, 12/7).