UnitedHealth settled SEC charges over stock-option backdating and misstated compensation expenses
Company: UnitedHealth Group
Summary
The U.S. Securities and Exchange Commission brought a civil enforcement action directly against UnitedHealth Group Inc. over the company's historical accounting for backdated employee stock options. The SEC alleged that, from no later than April 1994 through 2005, UnitedHealth used hindsight to select advantageous grant dates for in-the-money options while creating records that indicated the grants had occurred on earlier dates. According to the SEC, UnitedHealth failed to record and disclose the resulting compensation expenses, producing materially misleading financial statements. The Commission said the backdated grants caused UnitedHealth to overstate net income during fiscal years 1994 through 2005 by as much as $1.526 billion and to conceal more than $1 billion in stock-option compensation. UnitedHealth agreed to settle charges that it violated federal securities-law reporting, books-and-records and internal-control provisions without admitting or denying the SEC's allegations. The SEC did not charge the company itself with fraud or seek a monetary penalty, citing UnitedHealth's extensive cooperation and remediation. Those measures included an independent investigation, new accounting controls, removal of certain executives and directors, and efforts that the SEC said recouped nearly $1.8 billion in cash, option value and other benefits from former and current officers. The federal court entered final judgment against UnitedHealth on March 10, 2009. Primary SEC enforcement release: https://www.sec.gov/newsroom/press-releases/2008-302-sec-files-settled-enforcement-actions-against-unitedhealth-group-former-general-counsel-stock SEC complaint: https://www.sec.gov/files/litigation/complaints/2008/comp20836-uhg.pdf The company settlement must be distinguished from the separate monetary penalties and officer-and-director bars imposed on individual former executives. This record concerns UnitedHealth Group's reporting, recordkeeping and internal-control violations as resolved through the SEC civil action.
Record details
- Category
- Financial Misconduct
- When it happened
- April 1994–2005
- Status
- Resolved (March 10, 2009)
- Severity
- high
- Added to Rotten Company
Source
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