The former chief executive of health insurance giant UnitedHealth Group Inc. agreed to personally pay $30 million to shareholders and give up stock-option rights to settle a class-action lawsuit led by the California Public Employees’ Retirement System.
The nation’s biggest government pension fund, known as CalPERS, said Wednesday that the settlement with William McGuire satisfied a complaint that grew out of a 2006 scandal in which UnitedHealth provided executives with windfalls by backdating stock options given as incentive payments.
The payment comes on top of $895 million that United Health, the country’s second-largest health insurer, said it would make as part of an agreement struck in July with CalPERS and other large pension funds.
The proposed settlement with the company also includes corporate governance changes that had been sought by institutional investors. The moves include the election of a shareholder-nominated director and revamped criteria to ensure the independence of board members.
The agreement with McGuire must be approved by a U.S. district judge in Minnesota. In a statement, CalPERS said it believed that McGuire’s proposed payout was “the largest cash recovery ever obtained from an individual defendant in a securities class-action lawsuit.”
In addition to his planned reimbursement, McGuire said he would cancel options to buy 3.675 million shares of UnitedHealth stock.
McGuire, who resigned in 2006, has denied all allegations in the class-action complaint. “I am pleased to be able to help bring the stock-option-dating issues closer to complete resolution,” he said.
UnitedHealth, of Minnetonka, Minn., is the parent of Cypress-based PacifiCare, a health maintenance organization.
CalPERS board President Rob Feckner called the settlement “a victory for the 1.5 million members of our system and all UnitedHealth shareowners” that “sends a strong message to other corporations that continue to look after their own best interests rather than the shareowners’.”
CalPERS, which has total assets of $232 billion, holds 4.7 million shares of UnitedHealth worth $140 million.