UnitedHealth Group Inc. executives are repaying the company nearly $900 million to settle a corporate derivative lawsuit by Connecticut”™s pension fund and others that accused some company officers of garnering improper gains by backdating stock options.
Minneapolis-based UnitedHealth owns Oxford Health Plans Inc., a Trumbull subsidiary that runs one of Connecticut”™s six major insurance plans.
Separately, the company indicated it expects commercial enrollment to fall by 300,000 members next year, about 1 percent, attributing the drop in part to changes the company has made that physicians have deemed disruptive. The company did not make projections on a state-by-state basis.
The legal settlement is by far the largest amount paid to date over options backdating, according to Connecticut Attorney General Richard Blumenthal, and is the largest corporate derivative settlement in history according to Bloomberg News. Reportedly it is also the first instance of a “clawback” provision under the Sarbanes-Oxley Act that mandates repayments if executives profit by misstating corporate results.
Under the practice of stock options backdating, executives arranged the award of options to purchase stock for dates when the stock was trading at historically low levels. That allowed them to reap a bigger gain after they sell the stock.
“Executives must realize that public corporations are not their private piggy banks,” Blumenthal said in a prepared statement. “This landmark agreement is a powerful step toward enforcing real accountability. Executives work for their companies and shareholders, not solely for their personal enrichment.”
UnitedHealth”™s former CEO agreed to repay $420 million to the company, in addition to $200 million he had already agreed to relinquish; the company”™s current CEO has already returned $240 million.
With the completion of the corporate derivative lawsuit, which allows shareholders to represent the company”™s interests if they feel management is not doing so, Connecticut is still seeking direct damages as a plaintiff in a class-action lawsuit.
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