Former United CEO settles in case charging stock backdating

William McGuire, MD, and UnitedHealth Group face other civil and criminal inquiries into how executives maximized their stock options.

By Emily Berry, AMNews staff. Jan. 7, 2008.

UnitedHealth Group's former CEO and board chair has settled with the company and the Securities and Exchange Commission over allegations that he benefited from an illegal scheme to maximize what he earned in stock options. But legal troubles remain for both William McGuire, MD, and United.

On Dec. 5, 2007, Dr. McGuire settled with the Securities and Exchange Commission and with pension funds that had brought a lawsuit against him over backdating of stock options, which was alleged to have occurred from 1994 to 2005. The SEC settlement totaled $468 million, the largest ever resulting from options backdating.

Though Dr. McGuire admitted no wrongdoing, the size of the settlement "reflects the magnitude and scope of Dr. McGuire's misconduct," Linda Chatman Thomsen, director of the SEC's enforcement division, said in a prepared statement.

Of that total, $7 million was a civil fine paid to the SEC, another $12.7 million was a return of what the SEC called "ill-gotten gains," and the remainder was a forfeiture of options already issued. The SEC settlement also bars Dr. McGuire from serving as an officer or director in a public company for 10 years.

In the lawsuit settlement, Dr. McGuire agreed to reimburse United for $448 million in options and cash, on top of $200 million in options he gave back upon resigning from United in November 2006, after 15 years with the company. The SEC said the lawsuit settlement, which needs to be reviewed and approved by a U.S. District Court judge in Minnesota, was sufficient to cover the forfeiture it had ordered.