Criminal charges could be part of the fallout from the apparent stock options backdating that led to the coming departure of the chief executive at UnitedHealth Group Inc., two former federal prosecutors said.
They said William McGuire, who stepped down as chairman and agreed to retire as CEO by Dec. 1, could be particularly vulnerable. He apparently benefited the most from the backdating of options to make them more favorable for him, other executives and thousands of company employees.
“Because of the scale of the options granting, this has to be put in the egregious category, and that makes criminal prosecution more likely,” said Christopher Bebel, a securities lawyer now working in Houston who used to prosecute white-collar cases for the U.S. attorney’s office in Minnesota.
But UnitedHealth spokesman Mark Lindsay said Tuesday the company has seen no indication from authorities of any criminal investigation.
Minnetonka-based UnitedHealth, the nation’s second-largest health insurer, acknowledged earlier that it is under investigation by the Securities and Exchange Commission, the Internal Revenue Service and the Justice Department through the office of the U.S. attorney for the Southern District of New York.
Doug Kelley, a former assistant U.S. attorney in Minneapolis, said the involvement of the Southern District of New York is a signal that criminal issues are being pursued. That office is best known for prosecuting Wall Street and securities matters.
The SEC also can make recommendations to the Justice Department if it thinks criminal prosecution is appropriate, said Kelley, now a defense attorney.
A company-commissioned report found widespread, systematic backdating was probably the explanation for McGuire’s extraordinary good fortune in receiving stock options priced at the lowest possible point in eight different quarters.
Bebel said that report, conducted by the law firm of Wilmer Cutler Pickering Hale and Dorr, will give federal regulators and prosecutors a starting point for considering whether to pursue civil and-or criminal cases.
“That will be an excellent road map for government attorneys. It will allow them to hit the road running and shave a few miles off of the marathon,” Bebel said.
Just because of their prominence, Kelley said, McGuire and UnitedHealth could be more of a target than a smaller, lower-profile company might be.
“Deterrence is one of the noted outcomes of criminal prosecutions in the white-collar area,” he said.
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