Under the settlement, McGuire has agreed to pay $30 million to UNH shareowners and to cancel options to purchase 3.675 million shares of stock. “The settlement with McGuire, which is subject to approval by the United States District Court in Minnesota, is believed to be the largest cash recovery ever obtained from an individual defendant in a securities class action lawsuit,” CalPERS said in the announcement.
The proposed settlement also provides for an additional payment of $500,000 from UnitedHealth’s former General Counsel.
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 )