According to an Associated Press news report, plaintiffs, led by the California Public Employees Retirement System (CalPERS) and the Alaska Plumbing and Pipefitting Industry Pension Trust, had worked out the deal with defendants that U.S. District Court Judge James M. Rosenbaum has now approved.
Under the settlement, the Minnetonka, Minnesota.-based UnitedHealth has agreed to pay $895 million, while former Chairman and Chief Executive William McGuire agreed to pay $30 million, and to return stock options representing more than 3 million shares (See Former UnitedHealth CEO to Pay $30M to Settle CalPERS Suit ). That was believed to be the largest cash recovery ever obtained from an individual defendant in a securities class action lawsuit,” CalPERS said at the time.
The news report said the settlement also calls for a $500,000 payment from retired UnitedHealth General Counsel David J. Lubben, also a defendant.
The lawsuit centered on a scandal over the backdating of UnitedHealth stock options that forced McGuire to step down from both roles in 2006. The litigation claimed investors were hurt because UnitedHealth and McGuire didn’t really grant stock options when they said they did in the late 1990s and early 2000s.
In July, UnitedHealth Group announced settlement agreements resolving two separate lawsuits over prior stock options backdating, including an agreement with CalPERS and plaintiff class representative Alaska Plumbing and Pipefitting Industry Pension under which it will pay $895 million into a settlement fund for the benefit of class members (See UnitedHealth Settles Two Options Backdating Suits ).
The suit brought by the California Public Employees Retirement System (CalPERS) alleged shareholders were hurt when UnitedHealth was forced to restate profits after allegations of backdating were made public. However, UnitedHealth moved to dismiss the suit, arguing that CalPERS actually made $23 million on its UnitedHealth trades, depending on things like which accounting method and share price are used (See United Health Options Backdating Suit Gets Class Action Status ).
In October 2006, UnitedHealth announced its chief executive would step down after a report from an internal probe into the company’s stock option practices revealed that McGuire’s stock options saw a boost in value because they were “likely backdated.” (See UnitedHealth’s McGuire To Depart over Stock Options Scandal ).
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