UnitedHealth Group has agreed to settle a federal securities class-action lawsuit brought by a group of major shareholders for $895 million. The move, coming at a time of financial challenges for the health plan industry as a whole, should have a big impact on UnitedHealth's operations. The company will cut 4,000 jobs and is warning of weaker profits, already challenged by the slow U.S. economy and higher Medicare costs.
The lawsuit was brought by the California Public Employees Retirement System (CalPERS) over the health plan's stock-option grant practices. Such practices had helped lead to the departure of previous CEO William McGuire, who resigned in December 2006 over the scandal that arose when the company's practice of backdating options to favorable dates was discovered. The proposed settlement will impose new protections against such skullduggery, including a mandated holding period for options granted to execs and shareholder approval of any stock option re-pricing.
To learn more about the proposed settlement:
- read this Modern Healthcare article [1] (reg. req.)
Related Articles:
UnitedHealth's CEO ousted over questionable stock options [2]
UnitedHealth's McGuire gives up $400M in assets [3]
AMA tries to block UnitedHealth acquisition [4]
Links:
[1] http://www.modernhealthcare.com/apps/pbcs.dll/article?AID=/20080702/REG/851000082
[2] http://www.fiercehealthcare.com/story/unitedhealth-ceo-ousted/2006-10-16
[3] http://www.fiercehealthcare.com/story/unitedhealths-mcguire-gives-400m-assets/2007-12-07
[4] http://www.fiercehealthcare.com/story/ama-tries-to-block-unitedhealth-acquisition/2007-03-20