Former UnitedHealth chairman and CEO William W. McGuire agreed to pay a record settlement of $468 million to settle a stock options backdating case with the Securities and Exchange Commission.
The settlement is the first with an individual under the "clawback" provision of the Sarbanes-Oxley Act, which deprives corporate executives of their stock sale profits and bonuses earned while their companies were misleading investors.
The SEC alleged that from 1994 through 2005, McGuire caused UnitedHealth to grant undisclosed, in-the-money stock options to himself and other officers and employees without recording them in the company's books or disclosing them to shareholders.
The SEC claimed that he picked option grant dates that coincided with the dates of historically low quarterly closing prices for the company's common stock. McGuire did not admit or deny the SEC's charges, but he agreed to pay a $468 million settlement that includes a $7 million civil penalty and reimbursement to the Minneapolis-based health care company for all the incentive- and equity-based compensation he received from 2003 through 2006. Including the disgorgement, along with prejudgement interest and his Section 304 reimbursement, McGuire agreed to return approximately $600 million in cash and UnitedHealth options.
In March 2007, UnitedHealth restated its financial statements for 1994 through 2005, and disclosed pre-tax errors in stock-based compensation accounting that totaled $1.526 billion for that period.
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