Judge Denies CalPERS Bid for Summary Judgment in Suit
U.S. District Judge James Rosenbaum on Tuesday denied a request from attorneys for the California Public Employees' Retirement System for summary judgment on part of a shareholder class-action lawsuit filed against UnitedHealth Group over allegations that the company issued backdated stock options, the Minneapolis Star Tribune reports (Yee, Minneapolis Star Tribune, 10/2).
In October 2006, then-UnitedHealth CEO William McGuire agreed to resign after the release of a report that found he likely received backdated stock options.
The report, part of an internal investigation conducted by the law firm Wilmer Cutler Pickering Hale & Dorr at the request of the UnitedHealth board, found that 1.5 million stock options, most of which McGuire received from his 1999 contract, were "likely backdated."
In November 2006, McGuire and then-UnitedHealth Chief Operating Officer Stephen Hemsley agreed to return about $390 million in compensation from stock options. Hemsley replaced McGuire as UnitedHealth CEO. Rosenbaum in June denied a motion by UnitedHealth to dismiss the lawsuit (California Healthline, 6/6).
CalPERS attorneys sought summary judgment on part of the lawsuit to avoid a "wasteful, time-consuming and expensive" trial to resolve allegations that UnitedHealth made false statements related to the acquisition of PacifiCare.
In December 2005, CalPERS, which held shares of PacifiCare before the acquisition, received 550,000 shares of UnitedHealth valued at $63.79 each as part of the merger, attorneys for the pension fund said.
According to attorneys for UnitedHealth, that part of the lawsuit had to remain tied to the other claims, which involve securities fraud. UnitedHealth attorneys also argued that the company has a right to complete the discovery process involved in a trial to determine whether CalPERS experienced losses. Rosenbaum has not scheduled a date for the trial, which likely will begin after July 1, 2008 (Minneapolis Star Tribune, 10/2).