Backdating Case Yields Record-Breaking Recovery for UnitedHealth Shareholders

Connecticut treasurer Denise Nappier and Attorney General Richard Blumenthal announced Friday that an an investigation into backdating of stock options at UnitedHealth by corporate executives has led to a record breaking recovery. Over $887 million will be returned to the company, due in part to response of a pending lawsuit by shareholders.

The Connecticut Attorney General became involved because one of the lead plaintiffs in the Minnesota suit is the Connecticut Retirement Plans and Trust Funds. The state treasurer stated that approximately 70% of the damages suffered by UnitedHealth through the backdated options were recovered.

According to the agreements, the former UnitedHealth Chairman and CEO Dr. William McGuire, will repay $420 million and $25 million respectively. The current CEO, James Hemsley, will return $50 million to the company. The former Secretary and General Counsel David Lubben has submitted to binding arbitration that could result in additional award. When including already announced repricings for other employees - including previous agreements by the chief officers - the agreements total more than $887.9 million of value to UnitedHealth.

"The financial recovery here is truly groundbreaking," commented Nappier, the Treasurer of the State of Connecticut. "No doubt the company is to be commended for owning up big time and negotiating a milestone outcome that is in the best interest of the company and its shareholders. We remain cautiously optimistic while this settlement is not an end to itself, it is a forerunner for final resolution of all issues with UnitedHealth."

"Significant corporate governance reforms are still needed to ensure that the kinds of abuses that gave rise to this backdating scandal in the first place do not occur again," continued Nappier. "Although the Company already has adopted reforms since we commenced this litigation, we remain steadfast in our resolve to achieve the highest standards of ethical conduct, transparency and accountability for the benefit of all stakeholders."

Backdating is the practice of listing the grant date of a stock option at an earlier date than when it was actually given. This increases the value of the holders options when exercised because usually the earlier date is usually at a lower price.

"Corporate executives must realize that public corporations are not their private piggy banks." Blumenthal added. "This landmark agreement is a powerful step toward enforcing real accountability. Executives work for their companies and shareholders, not solely for their personal enrichment."

Source:

Connecticut State Attorney General's Office, Record-Breaking Financial Recovery Made in UnitedHealth Backdating Case, PR Newswire
American Bar Association, A Very Brief Encyclopedia of Securities Fraud