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US: UnitedHealth Ex-CEO Settles Pay Case


by VANESSA FUHRMANS Wall Street Journal
September 11th, 2008

Former UnitedHealth Group 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 billion.

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 vanessa.fuhrmans@wsj.com





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