UnitedHealth Group To Settle SEC Lawsuit Over Backdated Options
On Monday, UnitedHealth Group agreed to settle a lawsuit filed by the Securities and Exchange Commission over allegations that the company illegally backdated stock options, the St. Paul Pioneer Press reports (Forster, St. Paul Pioneer Press, 12/22).
The lawsuit alleges that UnitedHealth concealed from shareholders more than $1 billion in stock option compensation between 1994 and 2005. UnitedHealth allegedly changed the dates of stock options awarded to senior officials and other employees to dates when the stock had a lower share price, according to the lawsuit (Shwiff, Wall Street Journal, 12/23).
Under the settlement, UnitedHealth, which will admit no wrongdoing, agreed not to violate federal securities laws related to reporting and accounting. In addition, UnitedHealth General Counsel David Lubben must pay a fine of $575,000 and cannot serve as an official or a director at a public company for five years.
SEC will not charge UnitedHealth with fraud or seek monetary penalties, "based on the company's extraordinary cooperation in the commission's investigation, as well as its extensive remedial measures."
According to SEC, UnitedHealth shared the results of an internal review with the commission, removed senior officials and board members, voluntarily re-priced the stock options, established new safeguards to prevent fraud and settled two class-action lawsuits filed by shareholders.
Elizabeth Nowicki, associate professor of law at Tulane University, said that "SEC is sending a fairly compelling message" with the settlement. She added, "If indeed there was backdating by officers but the company and board immediately responds, that will go far for purposes of (avoiding) charges in the future against the corporate entity" (Yee, Minneapolis Star-Tribune, 12/22).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.