Legal News

New Evidence Unsealed in UnitedHealth Backdating Case

By Dan Slater

Emboldened by its class certification victory in March, the plaintiff-class in the UnitedHealth backdating case has unsealed new information that it says suggests the current CEO, Stephen Hemsley, was more involved in granting backdated options than previously concluded. Outside the context of the full documents, however, the excerpts are inconclusive. Here are stories from the WSJ, and the Minneapolis Star Tribune.

UnitedHealth dismissed the allegations and the characterization of Hemsley, pointing out that two company-commissioned, but independent, reviews had determined he played no real role in backdating option grants. “There is no substantiation to the plaintiffs’ allegations,” said UnitedHealth spokesman Don Nathan.

Last December, former UnitedHealth CEO, Dr. William McGuire, agreed to forfeit about $420 million in stock-option gains and retirement pay to settle shareholder and federal government claims related to stock-option backdating. (In addition to the $530 million McGuire made in compensation while running UnitedHealth, he was allowed to keep stock options valued at more than $800 million.) UnitedHealth, based in Minnetonka, Minn. — the Law Blog’s hometown — was one of the largest companies to be ensnared in the backdating scandal.

In a brief filed late yesterday, lawyers for lead plaintiff California Public Employees’ Retirement System, or CalPERS, filed the unredacted documents after federal judge James Rosenbaum granted their motion to have the information unsealed. According to the WSJ, the documents include snippets of internal memos and emails amassed by CalPERS attorneys.

While the brief reportedly quotes Hemsley pointing out on one occasion that options were granted “with an advantageous price,” most of the references in the brief come from other UnitedHealth executives. In one, from a memo dated Oct. 29, 2001, the attorneys state that UnitedHealth’s vice president of human capital, Robert Dapper, wrote in reference to approval of a backdated grant: “There are no challenges on this topic — grant dates and the corresponding strike price are set by me, Steve Hemsley, or Bill McGuire.”

Full post as published by Law Blog - WSJ.com on June 11, 2008 (boomark / email).