UNH Follow-up: Greed and Wrongdoing Become Public

On Sunday, October 15th, the Board of the UnitedHealth Plan (UNH) announced:

- that CEO William McGuire would step down immediately as Chairman and as a director, and leave the company by December 1, because an outside audit found that many of his stock option grants over nine years had been likely backdated to days when the company’s stock price was lower than the day the options were issued thereby increasing their value;

- that Dr. McGuire has promised to reprice his 1994-2002 options to their yearly highs. These option grants were once worth an incredible $1.6 Billion at the end of 2005;

- that its new CEO would be Stehen Hemsly, currently UNH’s President and COO, who also has promised to reprice his stock options, because of backdating, awarded through 2002 to the annual high share price for each year;

- that its General Cousel and one member of the Board’s compensation committee have resigned. The outside audit found that the financial relationship between Dr. McGuire and this member of the Board’s compensation committee, who was also his personal investment manager, constituted a conflict of interest. The General Counsel knew of this conflict, but did not inform the rest of the Board or take any corrective action; and

- that the company would miss the deadline for filing its audited third-quarter report with the SEC.

Currently, UNH is being investigated by the IRS, SEC, DOJ, and the Minn AG.

UNH’s stock price closed at $48.75 per share on Friday, October 13, before the Board announced its actions on Sunday. It’s high for the year was $64.61 last December.

UNH’s announcement is at: http://www.unitedhealthgroup.com/news/rel2006/1015SeriesofActions.htm

The findings of the outside audit are at:
www.unitedhealthgroup.com/assets/shared/Wilmer_Hale_Report.pdf

Also see my 7-21-06 post below: Something’s Seriously Wrong at UnitedHealth Plan (UNH).

armin