Risk & Compliance

Ohio AG Questions UnitedHealth Inaction

A special committee investigating stock-option practices has ''proof from their own experts of actual breach of fiduciary duty,'' says the attorney...
Stephen TaubFebruary 8, 2007

Ohio Attorney General Marc Dann is questioning the actions — or, rather, the inaction — of a UnitedHealth Group committee that is looking into possible legal proceedings against former chairman and chief executive officer William McGuire, according to published accounts.

UnitedHealth’s special litigation committee (SLC) was established in June in response to lawsuits over the company’s stock-option practices, according to Reuters. Two Ohio pension funds, for which Dann is a fiduciary, are the lead plaintiffs in a shareholder derivative suit against the Minneapolis-based company.

McGuire resigned from the health insurer in October after an internal report found that options awarded to him and others likely were backdated; chief financial officer Patrick Erlandson resigned a month later.

On Wednesday, according to Reuters, Dann fired off a letter to the committee, whose members include former Minnesota Supreme Court Justices Kathleen Blatz and Edward Stringer, asking why it had not yet issued its findings. “Why, when it is abundantly clear that backdating has taken place, does the SLC, which has already been working for seven months, need more time to complete its investigation?” Dann reportedly wrote.

Since the October internal report provided details about the company’s past options practices, said Dann, the committee should have completed its work. “They have proof from their own experts of actual breach of fiduciary duty,” he told the wire service. “The corporation should proceed to recover the money.”

Dunn also reportedly stated that last week, the special committee abruptly canceled a meeting with him. As a result, he told Reuters, he was concerned of the “possibility that a backroom deal with McGuire will be negotiated” by the committee. Dann asserted that plaintiffs should participate in any resolution of the company’s claims against McGuire.

According to Reuters, when asked about the letter, a UnitedHealth spokesman said the committee “is fully independent” and the company “is not aware of what the committee’s process is including.”