The California Public Employees’ Retirement System (CalPERS) announced today that it has entered into a proposed settlement of its class action lawsuit with the former Chief Executive Officer of UnitedHealth Group (UNH) William McGuire. McGuire has agreed to pay $30 million to UNH shareowners and to cancel options to purchase 3.675 million shares of stock to settle CalPERS’ claims.
The settlement with McGuire, which is subject to approval by the United States District Court in Minnesota, is believed to be the largest cash recovery ever obtained from an individual defendant in a securities class action lawsuit. The proposed settlement also provides for an additional payment of $500,000 from UnitedHealth’s former General Counsel.
“This is a victory for the 1.5 million members of our system and all UnitedHealth shareowners,” said Rob Feckner, President of the CalPERS Board. “We are glad to have this chapter of stock-option backdating abuse behind us and to achieve comprehensive relief for the Company’s shareowners. We hope this sends a strong message to other corporations that continue to look after their own best interests rather than the shareowners.”
The case came about as a result of media reports of stock option backdating. “In UnitedHealth’s case, the backdating was especially harmful to shareowners. In effect, this was an example of runaway executive compensation,” said Peter Mixon, CalPERS General Counsel. “This precedent-setting recovery demonstrates that the company’s true owners – shareowners – will hold CEOs accountable for disregarding principled corporate governance.”
Today’s settlement is the second victory for CalPERS and UNH shareowners in this action. In July 2008, an $895 million settlement, which remains subject to Court approval, was reached between CalPERS, UNH, and several other executives and directors as part of a federal class action lawsuit – one of the top ten securities fraud class action recoveries in the U.S. history.
McGuire’s payment of $30 million exceeds the individual cash payments made by defendants to settle civil actions in other recent corporate scandals. The pension fund was represented in the lawsuit by Coughlin Stoia Geller Rudman & Robbins LLP.
CalPERS has assets totaling approximately $232 billion, including 4.7 million UnitedHealth shares valued at about $140 million. The System provides retirement and health benefits to 1.5 million State and local public employees, retirees and their families. For more information, visit www.calpers.ca.gov.
