Legal News

UnitedHealth agrees to settle federal class action over backdating with $895M payment

By Jason Siegel

UnitedHealth Group Inc., the Minneapolis-based health care provider that was sued over about $2 billion in unexercised backdated stock options, has agreed to pay $895 million to settle a federal class action.

The proposed settlement, crafted by lead counsel Coughlin Stoia Geller Rudman & Robbins, is the largest involving stock options backdating claims in a class action. In re UnitedHealth Group Inc. PSLRA Litigation, No. 0:06-cv-01691 (D. Minn.)

Previously, the largest agreement in a stock options backdating class action was a $117.5 million deal with Mercury Interactive Corp. last fall.

In December, UnitedHealth and several former executives agreed to a $900 million settlement with several pension funds in a derivative case involving its stock options backdating practices. In re UnitedHealth Group Inc. Shareholder Derivative Litigation, No. 0:06-cv-01216 (D. Minn.). Lead counsel in that case was Karl Cambronne, a partner at Minneapolis-based Chestnut & Cambronne.

Today's proposed settlement, which is subject to approval by the court, UnitedHealth Group's board of directors and the board of administration of the California Public Employees' Retirement System (CalPERS), the lead plaintiff, resolves all claims against UnitedHealth and certain of its officers and directors.

UnitedHealth and the individual defendants, who exclude former chief executive William McGuire and former general counsel David Lubben, have not admitted wrongdoing as part of the proposed settlement. McGuire and Lubben, who agreed to settle the earlier derivative action, remain defendants in the class action.

The company also has agreed to implement changes to its corporate governance policies and practices, including a process to elect directors nominated by shareholders, a mandated holding period for options acquired by executives and shareholder approval of stock option re-pricing.

The complaint originally was filed in December 2006. Alaska Plumbing and Pipefitting Industry Pension Trust was the plaintiff class representative.

UnitedHealth also agreed to pay $17 million to resolve a related class action involving violations of the Employee Retirement Income Security Act (ERISA). That suit originally was filed in June 2006 against UnitedHealth and certain officers and directors.

The settlement is subject to final court approval. UnitedHealth and the individual defendants did not admit wrongdoing as part of that settlement.

-- Amanda Bronstad

Full post as published by Legal Pad | LA on July 03, 2008 (boomark / email).