A federal court granted The California Public Employees Retirement System's (CalPERS for short) request last Thursday to block ex-UnitedHealth CEO William McGuire from accessing millions of dollars worth of unexercised stock options and his retirement plan pending a special review of shareholder lawsuits against McGuire and UnitedHealth Group. These lawsuits allege that the company backdated options granted to executives in order to inflate their value.

The first sign of major problems surfaced during the Spring board elections when several major shareholders witheld their votes. Although the encumbants were re-elected anyway, Mr. McGuire was eventually forced to resign due to these allegations - his last day as CEO was last Thursday. According to SEC filings, McGuire has over $1 billion worth of unexercised options, although UnitedHealth said the value of these options has declined significantly since last reported. The CEO's severance package also includes a pension of $5.1 million per year in addition to a $6 million lump sum payout. And finally, we can see from ExecutiveDisclosure.com that the company's executive compensation already surpasses that of its peers:

Clearly CalPERS and other shareholders have valid concerns. The stock has moved down over 20% this year, in part due to this options scandal. Perhaps when this cloud clears there will be hope for UnitedHealth Group to turn itself around and start generating value for its shareholders again. However until then, shareholder lawsuits and a SEC investigation are likely to keep shares depressed.

Mentioned Companies
UnitedHealth Group, Inc. (UNH)