CalPERS settles with UnitedHealth for $895 million
SACRAMENTO, Calif. (Legal Newsline)-The California Public Employees' Retirement System announced Wednesday an $895-million settlement of a class-action lawsuit brought against UnitedHealth Group, over its stock-option grant practices.
The lawsuit pitted the largest public pension fund against the country's second largest health insurer.
CalPERS and other pension plans filed suit against the company on July 7, 2006, following a scandal in which UnitedHealth allowed executives to backdate stock options as incentive payments.
The lawsuit contended that UnitedHealth top executives were allowed to book purchase dates for stock options when share values were low and then sell those same shares when the prices were high.
William McGuire, then United Health's CEO, resigned and paid $7 million to the Securities and Exchange Commission, the Times reported, in addition to agreeing to repay $468 million to the company.
In April of 2006, CalPERS officials demanded McGuire explain $2.4 billion in stock options issued to himself and other executives. The Wall Street Journal reported that McGuire was investigated for holding nearly $1.6 billion in potential gains.
CalPERS holds 4.9 million UnitedHealth shares valued at $127 million, records show.
CalPERS officials believe the settlement is the largest stock option backdating recovery from a class-action lawsuit.
Peter Mixon, CalPERS' general counsel, called the settlement, along with corporate reforms that were also part of the settlement "a major step forward."
The settlement is subject to approval by the CalPERS Board of Administration, the United Health Group Board of Directors and the court, CalPERS officials said Thursday.
"I look forward to presenting (the settlement) in the weeks ahead to our Board for action," Mixon said.
UnitedHealth settled a second suit for $17 million into a separate class action lawsuit concerning the Employee Retirement Income Security Act. The moves, along with an announcement of a company restructuring that would cut 4,000 jobs were all announced Wednesday.
CalPERS assets total more than $235 billion and provides retirement and health benefits to 1.5 million state and local public employees, retirees and their families, according to the company's Web site.