NEW YORK - The former chief executive of UnitedHealth Group will forfeit more than $400 million in stock options and other compensation and pay a $7 million fine to settle an investigation into the health insurer's options practices.
William McGuire settled claims with both the US Securities and Exchange Commission and the company, which had a special committee investigate shareholder claims arising from options pay to top executives.
The company, the largest US health insurer by market value, also settled with its former general counsel, David Lubben, and former director, William Spears.
McGuire did not admit or deny the SEC's charges. Under the SEC settlement, he will be barred from serving as an officer or director of a public company for 10 years.
"The last 18 months have been an extraordinarily challenging period for my family and me," McGuire stated in a release. "I am very pleased to have reached a resolution that puts these matters to rest."
Chad Johnson, counsel to many of the public pension funds that were plaintiffs in the case, said, "The message is clear: Those imperial corporate executives who dare to use their positions of trust to take money from the company and its shareholders will be held personally accountable."
The SEC said the settlement is the first to use the "clawback" provision of the Sarbanes-Oxley corporate reform law to deprive a corporate executive of stock sale profits and bonuses earned while a company was misleading investors.
McGuire, who served as chief executive for 15 years and left United Healthcare last year after an independent counsel found evidence of backdating options, had accumulated more than $1.6 billion in stock options by the end of 2005. Following UnitedHealth's internal report, McGuire had agreed to reprice some of those options, reducing their value.
Including that repricing, McGuire will have given up more than $600 million, the company said.
"Is this the pound of flesh?" asked Sheryl Skolnick, an analyst at CRT Capital who follows United Healthcare. "There will be those who will argue that it's somehow not enough . . . but it's a significant portion to surrender."
Lawyers representing shareholders in similar actions greeted the settlement with approval.
Mark Molumphy, lead counsel of a shareholder derivative action against Apple Inc., said: "The important fact is that the people who got the grants are now being forced to give that money back, which to date really hasn't been the case. "We think that is the way these cases should be resolved. Frankly, the Apple case should have been resolved months ago."
Shares of UnitedHealth closed yesterday at $55.98 on the New York Stock Exchange.
