UnitedHealth faces the music

The Associated Press reports:

UnitedHealth Group Inc. will cut at least 4,000 jobs, or 5 percent of its workforce, in a restructuring and warned Wednesday that a weaker environment and higher costs will cut into profits this year. ... The company also said it will pay $895 million to settle lawsuits over stock options backdating, and will pay $17 million into a fund in an agreement to resolve a suit related to the Employee Retirement Income Security Act. ...

The options settlement stems from a 2006 complaint filed in U.S. District Court in Minnesota. The California Public Employees Retirement System (CalPERS) and Alaska Plumbing and Pipefitting Industry Pension Trust, the lead plaintiffs, argued that the backdating cost shareholders money.

The scandal ultimately forced out Bill McGuire, UnitedHealth's chief executive.

Hemsley said the settlement helps the company avoid more costly litigation.

Ramzi Abadou, an attorney representing CalPERS, called it "a significant, epic settlement" that far exceeded previous payouts in options backdating lawsuits. ...

McGuire is not part of the settlement. His attorney, David Brodsky, issued a statement saying McGuire will continue to fight "because he is not liable for any alleged shareholder losses."

Also see reader comments coming in to the Star Tribune website. Some examples:

• This was bound to happen due to their corporate greed. This company is imploding and as a former employee who knew well enough to get the hell out, I am happy to see it. Enough of these CEO's and the like making mulit-million dollar salaries at the expense of the little people, both employees and policy holders.
• How dumb do corporate PR departments think we are? They try to blame market conditions, but don't you think having to pay $895 million due to the backdating scandal has an impact on "rising costs". 4,000 jobs gone because of the illegal actions of a few people at the top. They pay out of their excess, and the rest pay with their jobs. Yeah, United Health!
• Mcguire "not responsible for alleged shareholder losses" - I love that quote! He certainly was willing to take credit (and MAJOR cash - 93m one year?) for shareholder gains! Seems to be a running theme - small groups of people making huge rewards but as soon as the money goes away they bail, leaving the taxpayers and shareholders to cover the loss. Some pundit on the radio said it well - our nation is one where we are capitalists when it comes to rewards but socialist about risk. one more way the average citizen gets shafted.

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This page contains a single entry by Gary Schwitzer published on July 2, 2008 2:10 PM.

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