UnitedHealth Group Inc. Case 05/05/2006
Shareholders of UnitedHealth Group won a state court's approval of a 2007 settlement of a lawsuit over alleged backdating of stock options. The settlement calls for former executives to give stock options and benefits then valued at $895 million back to the Minnetonka-based company.
Settlement News - 01/23/2009
On January 15, 2009, UnitedHealth Group announced it has agreed to a deal to settle a class action lawsuit against it for $350 million. The lawsuit, filed by patients and doctors around the country, claimed UnitedHealth used a flawed database that set the payments of out-of-network physicians below the amount the physicians normally charge, which would leave the patients with a bill to make up the difference. The proposed settlement will cover patients with out-of-network claims and their doctors whose reimbursement amounts were determined using UnitedHealth’s customary rates. The settlement covers the period between March 15, 1994 and the time a court approves the agreement. The settlement deal, which is still subject to court approval, has been challenged by some plaintiff’s lawyers stating that the settlement amount is too low.
Two days earlier, UnitedHealth paid $50 million in a settlement with New York Attorney General Andrew Cuomo, which requires Ingenix, UnitedHealth’s technology arm, to give up this database to a not-for-profit agency that will revamp the database to make it more transparent. The $50 million settlement will be used to help set up the new database system.
Also, on September 10, 2008, former chief executive officer (CEO) of UnitedHealth, William W. McGuire, announced that he is settling a class action lawsuit against him for $30 million. The class action lawsuit, brought on by the California Public Employees’ Retirement System (CalPERS) alleged that McGuire and UnitedHealth engaged in stock options backdating. As part of the settlement, McGuire agreed cancel his options to purchase 3.675 million shares of UnitedHealth stock. UnitedHealth has already agreed to pay $895 million in order to settle the lawsuit.
Original Post - 12/02/2008
According to a press release dated July 2, 2008, UnitedHealth Group (NYSE: UNH) announced it has reached an agreement in principle with lead plaintiff California Public Employees’ Retirement System (CalPERS) and plaintiff class representative Alaska Plumbing and Pipefitting Industry Pension Trust, on behalf of themselves and members of the class, to settle the federal securities class action lawsuit arising from the consolidated amended complaint filed on December 8, 2006, in the U.S. District Court in Minnesota against the Company and certain current and former officers and directors relating to its historical stock options practices. Under the terms of the proposed settlement, UnitedHealth Group will pay $895 million into a settlement fund for the benefit of class members. … The proposed settlement will fully resolve all claims against the Company, all current officers and directors named in the lawsuit, and certain former officers and directors named in the lawsuit.
In a press release dated March 19, 2008, a federal judge in Minnesota has given class-action status to a lawsuit against UnitedHealth Group Inc. filed by the California Public Employees’ Retirement System over the health insurer’s past stock-option grant practices. In the order, U.S. Chief District Judge James M. Rosenbaum certified the class as anyone who bought or otherwise acquired UnitedHealth Group’s publicly traded securities between Jan. 20, 2005, and May 17, 2006, including those buyers who also held UnitedHealth stock during the 2002, 2003, 2004 , 2005 and 2006 UnitedHealth proxy solicitations and those who acquired UnitedHealth’s stock in or related to its Dec. 20, 2005, merger with PacifiCare Health Systems. The judge named CalPERS, the largest U.S. public pension fund, as well as the Plumbing and Pipefitting Industry Pension Trust, as representatives of the class.
As summarized by the Company’s FORM 10-K For The Fiscal Year Ended December 31, 2007, on May 5, 2006, the first of seven putative class actions alleging a violation of the federal securities laws was brought by an individual shareholder against certain of our current and former officers and directors in the United States District Court for the District of Minnesota. On December 8, 2006, a consolidated amended complaint was filed consolidating the actions into a single action. The action is captioned In re UnitedHealth Group Incorporated PSLRA Litigation. The action was brought by lead plaintiff California Public Employees Retirement System against the Company and certain of our current and former officers and directors. The consolidated amended complaint alleges that defendants, in connection with the same alleged course of conduct identified in the shareholder derivative actions described above, made misrepresentations and omissions during the period between January 20, 2005 and May 17, 2006, in press releases and public filings that artificially inflated the price of our common stock. The consolidated amended complaint also asserts that during the class period, certain defendants sold shares of our common stock while in possession of material, non-public information concerning the matters set forth in the complaint. The consolidated amended complaint alleges claims under Sections 10(b), 14(a), 20(a) and 20A of the Securities and Exchange Act of 1934 and Sections 11 and 15 of the 1933 Act. The action seeks unspecified money damages and equitable relief. Defendants moved to dismiss the consolidated amended complaint on February 6, 2007. The motion to dismiss was denied in an order filed on June 4, 2007 and discovery is ongoing. On July 18, 2007, the lead plaintiff moved for partial summary judgment on the Company’s liability on the Section 11 claim. The court denied the motion for partial summary judgment on October 2, 2007. The parties are currently engaged in discovery and the case is currently scheduled to be ready for trial in July 2008.
The original Complaint alleges that defendants UnitedHealth and certain of its officers and directors violated federal securities laws by issuing a series of materially false statements. Specifically, defendants misrepresented and omitted material facts concerning UnitedHealth’s backdating of stock option grants to defendants the Company’s CEO and the Company’s COO. UnitedHealth represented that the exercise price of all stock options would be no less than the fair market value of UnitedHealth’s common stock, measured by the publicly traded closing price for UnitedHealth stock on the day of the grant. However, in reality, those options were backdated so their exercise price correlated to a day on or near the day UnitedHealth stock hit its low price for the year, or directly in advance of sharp increases in the price of UnitedHealth stock. Defendants the Company’s CEO and the Company’s COO have collectively earned over $500 million by exercising these backdated options.
As the truth concerning United Health’s practice of backdating option grants became known to the market from a variety of sources, the price of UnitedHealth stock fell $6.76, or 12%, over several trading sessions.
The lawsuit has been filed on behalf of all persons who purchased or otherwise acquired the publicly traded securities of UnitedHealth Group, Inc. during the Class Period, and also included are all those who acquired UnitedHealth’s securities through its acquisitions of AmeriChoice, Mid Atlantic Medical, Oxford Health Plans and Pacificare Health.