The landmark settlement of more than $600 million reached late last week between William McGuire and UnitedHealth Groupas well as a separate settlement with the Securities and Exchange Commissionisnt the end of the story.
Both McGuire, the former chairman and chief executive officer, and UnitedHealth face ongoing investigations or legal action from the U.S. Justice Department, the Minnesota attorney general and shareholders. The SEC also continues to have an open investigation into UnitedHealth. McGuire resigned effective December 2006 after an internal review showed that he likely picked the most profitable dates to price some of his options retroactively.
First up is an expected court decision this week on whether McGuire will finally get access to his remaining 24 million unexercised shares in the company, worth approximately $800 million, according to his attorneys.
The California Public Employees Retirement System is leading the shareholder lawsuit against McGuire, UnitedHealth and other top current and former executives. CalPERS is seeking to continue an injunction that would prevent McGuire from exercising those options, some of which were granted in his early years with the company. We are currently evaluating the proposed settlement with UnitedHealth and are continuing with our case, said CalPERS spokesman Clark McKinley.
Under the settlement with UnitedHealth, announced Dec. 6, McGuire and two other former top executives, agreed to forfeit company benefits valued at a total of about $900 million. Under those terms, McGuire will surrender 9.2 million shares, worth about $320 million. He will also give up his retirement pay worth about $91 million and executive plan savings of $8 million.
Forfeiting these benefitswhich combined with about $200 million in options McGuire previously agreed to give up, for a total of $600 millionwill cut all ties between McGuire and UnitedHealth, provided the settlement is approved by a court.
That agreement satisfies an enforcement action by the SEC against McGuire, whereby he pledged to give back these suspect options to his former employer, along with paying a $7 million civil penalty. The SEC settlement, also announced Dec. 6, in which McGuire admitted to no wrongdoing, is the first with an individual under the Sarbanes-Oxley Act to deprive corporate executives of profits and bonuses while their companies were misleading investors. Linda Chatman Thomsen, director of the SECs Enforcement Division, said the large settlement reflects the magnitude and scope of Dr. McGuires misconduct.
For its part, UnitedHealth is seeking to put the entire matter behind it with its settlement and the swift reform actions made last fall. The outcome of this review is another step in resolving issues from the past that we have dealt with openly and forthrightly, said company spokesman Tyler Mason.
McGuire, a former pulmonologist, also wants to move on, according to his attorney Steve Gaskins. Under his settlement with the SEC, McGuire will have to wait 10 years before he can serve as an officer of another company. If he gets into a position where he is free to go back in the business, he is just brimming with ideas about healthcare and education, Gaskins said. He wants to get going.