UnitedHealth Ex-CEO Settles Pay Case
By Vanessa Fuhrmans
The Wall Street Journal
Thursday, September 11, 2008
Inc. Chief Executive William McGuire agreed to pay $30 million
and forfeit 3.7 million stock options to settle shareholder
claims related to options backdating, adding to what was already
one of the largest executive-pay givebacks in history.
The agreement is Dr. McGuire's third major settlement of an
options-backdating claim since revelations of the practice led
to his ouster nearly two years ago. Dr. McGuire denied the
allegations in the class-action lawsuit. UnitedHealth resolved
the same case separately in July, agreeing to pay more than $895
million in the largest settlement of a backdating case to date.
The Minnetonka, Minn., health-insurance titan has been one of
the largest corporations ensnared in the backdating scandal, in
which dozens of companies were found to have manipulated the
dates that options were awarded in order to give executives a
chance to reap more compensation. Dr. McGuire was among the most
successful and highest-paid executives in the U.S. before the
scandal erupted, and he held options valued at about $1.78
That wealth has shrunk to nearly one-sixth of that amount in the
wake of Dr. McGuire's givebacks and the company's declining
share price. Dr. McGuire, who reaped about $530 million in pay
and options gains while running UnitedHealth from 1991-2006,
still retains 20 million stock options that could be exercised
for a gain of $307 million at the current share price.
UnitedHealth shares have fallen 50% since the start of the year.
They rose 83 cents, or 2.9%, to $29.31, in 4 p.m. New York Stock
Exchange composite trading Wednesday.
To resolve other civil and government claims, Dr. McGuire
already had agreed to forfeit 9.2 million stock options and
nearly $100 million in retirement pay, in addition to a $7
million penalty to the Securities and Exchange Commission. That
comes on top of unrealized gains he surrendered at the time of
his ouster -- estimated then at $200 million -- by agreeing to
reprice previously granted options.
He still faces a criminal inquiry into UnitedHealth's options
scandal by the U.S. attorney
for the Southern District of New York. That office wouldn't
comment on or confirm the status of the probe.
"I am pleased to be able to help bring the stock-option dating
issues closer to complete resolution," Dr. McGuire said. "As
CEO, I consistently took responsibility to help address
important issues facing UnitedHealth Group, and I have continued
to do my part to resolve stock option dating issues since
leaving the company."
The current settlement resolves a class action led by the
California Public Employees' Retirement System. As part of the
deal, Dr. McGuire will pay the $30 million into a fund for
shareholder plaintiffs, adding to the $895 million UnitedHealth
agreed to pay.
David Lubben, UnitedHealth's former general counsel who was also
ousted after a board-commissioned probe, also settled the
Calpers-led suit yesterday, for $500,000.
--Mark Maremont and Charles Forelle contributed to this article.
Write to Vanessa Fuhrmans at