UnitedHealth, Barnes & Noble Hit with Options Dating Lawsuits

July 13, 2006 (PLANSPONSOR.com) - The California Public Employees Retirement System (CalPERS) reacted to the stock options backdating controversy with a lawsuit over the issue against UnitedHealth Group Inc.

The CalPERS suit alleges that there are discrepancies between UnitedHealth’s public statements about its profits and the effects on those profits caused by its troubles with its stock options that surfaced this year, according to the Associated Press. In May, UnitedHealth acknowledged a “significant deficiency” in its stock option grants. The company also has said it may have to restate as much as $286 million in earnings for 2003, 2004 and 2005 (See  UnitedHealth Under Fire for Stock Options ).

The CalPERS lawsuit is merely the latest litigation over the options dating issue including some filed by public pensions in Ohio and Minnesota  (See Public Pension Funds Sue UnitedHealth over Stock Option Grants ).

The attention on UnitedHealth has so far focused on the backdating issue. But the CalPERS legal complaint also claims that UnitedHealth “spring-loaded” options by granting options right before revelations about positive company news to help lock in a profit for the recipient.

CalPERS named the company, Chairman and Chief Executive William McGuire, President and Chief Operating Officer Stephen Hemsley, as well as the company’s chief financial officer, general counsel, its directors and the CEOs of four of its divisions as defendants.

“The plaintiffs in this case have a cast a very wide net, and we intend to defend ourselves very vigorously,” said UnitedHealth spokesman Mark Lindsay. He said some of the executives were named simply because they exercised stock options.

Barnes & Noble Also Sued

Meanwhile, national bookseller Barnes & Noble has also been hit with an options dating lawsuit, according to a shareholder’s case filed in New York County Supreme Court.


According to the Associated Press, the company said the lawsuit names current and former executives, as well as certain members of its board.

Barnes & Noble said it believes there is no merit to the lawsuit and also said its stock options practices “have always been entirely appropriate.” The company said its audit committee will still retain independent legal counsel and review its options practices.