UnitedHealth Ex-CEO Agrees to Payback

In what is reported to be one of the largest executive paybacks in history, the ex-CEO of UnitedHealth has agreed to forego about $468 million in stock-option gains and retirement pay to settle claims related to stock options backdating.

The settlement with William W. McGuire, M.D., the former CEO and chairman of UnitedHealth Group, is the first with an individual under the "clawback" provision (Section 304) of the Sarbanes-Oxley Act to deprive corporate executives of their stock sale profits and bonuses earned while their companies were misleading investors.

The Securities and Exchange Commission complaint alleges that during a 12-year period, McGuire repeatedly caused the company to grant undisclosed, in-the-money stock options to himself and other UnitedHealth officers and employees without recording in the company's books and disclosing to shareholders material amounts of compensation expenses as required by applicable accounting rules.

Without admitting or denying the SEC's charges, McGuire agreed to the $468 million settlement that includes a $7 million civil penalty and reimbursement to the Minneapolis-based health care company for all incentive- and equity-based compensation he received from 2003 through 2006.

“Whenever a corporate officer misleads investors about a company's performance by secretly backdating stock options, the integrity of our markets is undermined,” said SEC Chairman Christopher Cox. “As demonstrated in this case, the SEC is committed to holding corporate officers accountable for illegally backdating stock options and will seek the return of undeserved compensation.”

Linda Chatman Thomsen, director of the SEC's Enforcement Division, said, “The $468 million settlement in this case, including the largest penalty assessed against an individual in an options backdating case, reflects the magnitude and scope of Dr. McGuire's misconduct.”