Blockbuster UNH-McGuire settlement gets smaller

Here's something else taking a big hit from the tanking stock market: shareholder lawsuit settlements.

The $420 million settlement brokered a year ago between UnitedHealth Group Inc. and its former CEO, William McGuire, is now worth $168 million.

That's because only about $100 million of the proposed settlement took the form of cash. The rest was in -- you guessed it -- stock options.

UnitedHealth's share price has fallen about 60 percent since December 2007, and some of those options are now underwater, or essentially worthless at the current share price of $23.54.

Attorneys laid out the numbers Friday at a court hearing in Minneapolis to try to persuade a federal judge to swiftly approve the settlement. The deal has been in limbo since U.S. District Judge James Rosenbaum questioned to what degree he could review it. The Minnesota Supreme Court later said the judge could do only a limited review.

The case is one part of a complex legal saga involving backdated stock options at UnitedHealth Group that resulted in a flurry of shareholder lawsuits. McGuire, once Minnesota's best-compensated executive, stepped down in late 2006 after an internal investigation found that stock options at the company had likely been backdated, allowing those who got them to maximize profits.

Much smaller settlements between the Minnetonka-based insurer and two others -- former general counsel David Lubbens and former board member William Spears -- have also shrunk, according to Barbara Berens, an attorney for the special litigation committee of UnitedHealth that negotiated the deal with shareholders.

The judge said Friday he would rule later.

Freeze requested

Also on Friday, McGuire's lawyer, David Brodsky, asked Rosenbaum to lift a freeze on remaining options McGuire holds.

McGuire has close to 14 million stock options in UnitedHealth Group currently worth about $102 million. The judge said he was inclined to unfreeze them, but didn't do so immediately.