William W. McGuire
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William W. McGuire M.D. was the CEO of UnitedHealth Group Inc. from 1992 until 1 December 2006 (see section "Resignation" below). He attended the University of Texas-Austin and is a member of Lambda Chi Alpha Fraternity.
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[edit] Options Backdating Investigations and Lawsuits
In 2006, the Securities and Exchange Commission began investigating the conduct of United Health's management and directors, including Dr. McGuire, as did the Internal Revenue Service and prosecutors in the U.S. attorney's office for the Southern District of New York, who have subpoenaed documents from the company.
The investigations came to light after a series of probing stories in the Wall Street Journal in May 2006, discussing the apparent backdating of hundreds of millions of dollars' worth of stock options — in a process called options backdating — by UHG management. The backdating apparently occurred with the knowledge and approval of the directors, according to the Journal. Major shareholders have filed lawsuits accusing former New Jersey governor Thomas Kean and United Health's other directors of failing in their fiduciary duty.[1][2]
[edit] Resignation
On 15 October 2006, it was announced that McGuire would step down immediately as chairman and director of United Health, and step down as CEO on 1 December 2006 due to his involvement in the employee stock options scandal. Simultaneously, it was announced that he would be replaced as CEO by Stephen Hemsley, who has served as President and COO and is a member of the board of directors. McGuire's exit compensation from UnitedHealth, expected to be around $1.1 billion, would be the largest golden parachute in the history of corporate America.[3]
[edit] McGuire's Settlement With SEC
On 6 December 2007, the SEC announced a settlement under which McGuire was to repay $468 million, including a $7 million civil penalty, as a partial settlement of the backdating prosecution. He was also barred from serving as an officer or director of a public company for ten years.[4][5][6] This was the first time in which the little-used "clawback" provision under the Sarbanes-Oxley Act was used against an individual by the SEC. The SEC continued its investigations even after it in 2008 settled legal actions against both United Health Care itself and the corporation's former general counsel.[7].
[edit] Compensation level again controversial in 2009
McGuire's compensation became controversial again on May 21st, 2009, when Elizabeth Edwards, speaking on The Daily Show, used it to support her argument for a public alternative to commercial insurance[8]. Edwards stressed the importance of restoring competition in health insurance markets noting that at one point, "the President of United Health made so much money, that one of every $700 that was spent in this country on health care went to pay him":
It’s really important, and this is the part I’m afraid will get negotiated away. We have to have a public provider. That is, instead of buying your insurance from United Health Care, or from Blue Cross, you could actually pick a government provider. The insurance companies are against it because they don’t want that competition. And because they’re afraid of the threat of the competition they’re already saying we’re going to cut prices, we’re going to make this so much easier to get. Just the threat, so imagine what the reality will do. We will actually have health costs that could work.
Estimates of McGuire's 2005 compensation range from $59,625,444 [9] to $124.8 million[10], and the revenue of United Health Care was then $71 billion. It has therefore been suggested that Mrs Edwards may have meant to say that one of every $700 that was spent on United Health Care premiums went to pay McGuire.
[edit] References
- ^ "A Board With Its Back To The Wall: UnitedHealth directors aren't ready to oust embattled CEO McGuire. Here's why", Business Week, July 10, 2006
- ^ Loren Steffy, "How William McGuire earned that fat paycheck", Houston Chronicle newspaper, November 7, 2006
- ^ UnitedHealth Panel May Face Scrutiny Joshua Freed, AP Business Writer, San Francisco Chronicle, Sunday, April 23, 2006
- ^ Securities and Exchange Commission v. William W. McGuire, M.D., Civil Action No. 07-CV-4779-JMR/FLN (D. Minn. 2007)U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20387 / December 6, 2007
- ^ Former UnitedHealth Group CEO/Chairman Settles Stock Options Backdating Case for $468 Million SEC Press release 2007-255
- ^ Dr. William McGuire Settles with the SEC and the UnitedHealth Group Special Litigation Committee on Stock Options Matter Latham and Watkins, LLP, Press release, December 6, 2007
- ^ SEC Files Settled Enforcement Actions Against UnitedHealth Group and Former General Counsel in Stock Options Backdating Case SEC Press release 2008-302]
- ^ WonkRoom page including embedded clip from The Daily Show
- ^ UnitedHealth Group Case Study, 2005 AFL-CIO estimate of McGuire compensation
- ^ United Health CEO earned $124.8 million in 2005 Health Care Economist, February 14, 2006
