UnitedHealth Under Fire for Stock Options

May 11, 2006 (PLANSPONSOR.com) - Under fire for the timing of its stock options and the creation of a $1.6 billion option for its CEO, UnitedHealth Group Inc. said it may restate results that could reduce past earnings by as much as $286 million.

Reuters reports that UnitedHealth also said the Securities and Exchange Commission (SEC) is conducting an informal inquiry into its stock options granting practices. The company said it has identified through its own investigation a “significant deficiency” in its controls relating to stock option plan administration, and accounting for and disclosure of stock option grants, according to Reuters.

In its quarterly filing with the SEC, the company said it may be required to record additional charges for stock-based compensation expense and the charges could be material and require restatement.   It estimated the restatement could decrease net earnings by $150 million in 2005, $84 million in 2004, and $52 million in 2003.

UnitedHealth said it also may be required to pay additional taxes for compensation tied to certain stock options which were previously exercised, and that it may not be able to take additional deductions associated with certain options in the future. In addition, it could be subject to regulatory fines, penalties or other contingent liabilities, at the conclusion of the SEC inquiry.

Reviews by a committee of independent directors, aided by independent counsel and accounting advisers, as well as the company itself, with the assistance of outside counsel and accounting advisers, are continuing.