This excerpt taken from the UNH 8-K filed Oct 16, 2006.
Grants in Connection with 1999 Employment Agreements
We conclude that these options grants were likely backdated.
Dr. McGuire and Mr. Hemsley were awarded options to acquire 1,000,000 shares and 500,000 shares of UnitedHealth stock, respectively, in connection with their 1999 employment agreements.17 The options to acquire the shares were granted effective October 13, 1999. Dr. McGuire maintains that on October 13 he and Mr. Spears agreed to the final terms of the employment agreements. While Mr. Spears spoke to Dr. McGuire around this time period, he does not recall the date he discussed the agreements with Dr. McGuire and never believed that he had authority to bind the Ad Hoc Committee.
Although the Board and Compensation Committee held their regular meetings on October 26, 1999, the Ad Hoc Committee, which had authority to negotiate and execute the employment contracts, did not meet on that date. It is likely that the employment contracts were not approved by the Ad Hoc Committee until its November 5, 1999 meeting since the meeting notice stated its purpose was the finalization of proposed employment agreements. The employment agreements were signed in December 1999, but made effective October 13, 1999.
Related to the employment agreement negotiations is a press release issued by the Company on September 16, 1999. In it, the Company stated: Both Hemsley and McGuire have entered into new, long-term employment agreements with UnitedHealth Group. The press release, which was approved by Dr. McGuire, was intended to ease investor concerns about Dr. McGuires intention to stay at the Company following Mr. Hemsleys promotion in March 2000 to President of UnitedHealth. Neither Dr. McGuires nor Mr. Hemsleys employment contract was entered into by the date of the press release. In fact, the number of options to be granted to Dr. McGuire pursuant to his contract and the price of those options remained unresolved in September, and likely were not approved by the Ad Hoc Committee until its meeting on November 5, 1999. The September 1999 press release was inaccurate with respect to the employment agreements.
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