UnitedHealth Dodges A Big One in SEC Options Backdating Settlement (UNH)

UnitedHealth Group (NYSE: UNH) appears to have escaped any serious hooks of the SEC in its stock options backdating fiasco.  Its Special Litigation Committee, an independent committee comprised of two former Minnesota Supreme Court Justices, has concluded its review of claims relating to the UnitedHealth historical stock option practices brought against certain current and former officers and directors in federal and state derivative lawsuits.

Based on a 15 month review, the SLC reached settlement agreements on behalf of UnitedHealth with UnitedHealth Group’s former Chairman and CEO William W. McGuire, M.D., former General Counsel David J. Lubben, and former Director William G. Spears.

McGuire is paying out a fortune of roughly $600 million, but he got to the point that he buily dynasty money from what appeared to be obvious backdating on his stock options grants:

• He will surrender to UnitedHealth Group certain stock options to acquire 9,223,360 shares of common stock, which the SLC has valued at approximately $320 million;
• He will surrender his interest in the company Supplemental Executive Retirement Plan, valued at approximately $91 million;
• He will surrender approximately $8 million to the company in his Executive Savings Plan Account; and
• He will relinquish claims to other post-employment benefits under his Employment Agreement.

The SLC has valued the total amount to be relinquished by current and former officers pursuant to these settlement agreement to be approximately $900 million in total.  The settlement agreements and the dismissal of the derivative actions are subject to notice to the Company’s shareholders and Court approval.

Don’t feel too sorry for Mr. McGuire.  His original golden parachute was somewhere in the vicinity of $1.1 Billion.  He and many of the McGuire clan should now have dynasty money for many generations.  Shares are calm in after-hours trading as this was ultimately expected to be a formality by the time you consider its massive size.

Jon C. Ogg
December 6, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.