In what is reported to be one of the largest executivepaybacks in history, the ex-CEO of UnitedHealth has agreed to forego about $468million in stock-option gains and retirement pay to settle claims related tostock options backdating.
The settlement with William W.McGuire, M.D., the former CEO and chairman of UnitedHealth Group, is the firstwith an individual under the “clawback” provision (Section 304) ofthe Sarbanes-Oxley Act to deprive corporate executives of their stock saleprofits and bonuses earned while their companies were misleading investors.
The Securities and Exchange Commission complaint alleges thatduring a 12-year period, McGuire repeatedly caused the company to grantundisclosed, in-the-money stock options to himself and other UnitedHealthofficers and employees without recording in the company’s books and disclosingto shareholders material amounts of compensation expenses as required byapplicable accounting rules.
Without admitting or denying the SEC’s charges,McGuire agreed to the $468 million settlement that includes a $7 million civilpenalty and reimbursement to the Minneapolis-based health care company for allincentive- and equity-based compensation he received from 2003 through 2006.
“Whenever a corporate officermisleads investors about a company’s performance by secretly backdating stockoptions, the integrity of our markets is undermined,” said SEC ChairmanChristopher Cox. “As demonstrated in this case, the SEC is committed to holdingcorporate officers accountable for illegally backdating stock options and willseek the return of undeserved compensation.”
Linda Chatman Thomsen, director ofthe SEC’s Enforcement Division, said, “The $468 million settlement in thiscase, including the largest penalty assessed against an individual in anoptions backdating case, reflects the magnitude and scope of Dr. McGuire’smisconduct.”