According to the docket, on May 19, 2000, the court entered the Order and Final Judgment by U.S. District Judge James M. Rosenbaum approving stipulation of settlement and dismissing the case with prejudice and without costs. Counsel for plaintiff class was awarded attorney fees and expenses from the settlement fund.
On February 4, 2000, the parties entered into a settlement agreement. The company's insurers have agreed to cover the cost of the settlement. The amount of the settlement remains undisclosed, since the insurer had agreed to pay and there was no material effect on UnitedHealth's balance sheet.
A total of six suits were filed in 1998 in the U.S. District Court for the District of Minnesota. These actions allege that the company defendant made false or misleading statements about the performance of the company's Medicare business, resulting in losses for investors. In addition, two of the six actions also alleged that the company made false statements about its medical costs and expenses related to realignment.
On January 19, 1999, the company received a consolidated amended complaint (In re United HealthCare Corporation Securities Litigation, No. 98-1888 in the United States District Court for the District of Minnesota) for the six suits, which essentially restates the allegations made in the original complaints.
On March 22, 1999, two actions were filed also in the United States District Court for the District of Minnesota by two pension funds against the company. These individual actions essentially restate the allegations made in the purported class actions and claim violations of Sections 10(b), 18(a) and 20 of the Securities Exchange Act. In addition, both actions assert a claim of negligent misrepresentation and securities claims under state law. In the aggregate, the plaintiff pension funds seek compensatory damages totaling approximately $12.1 million.
The original Complaint alleges that defendants issued materially false and misleading statements during the Class Period about the performance of United HealthCare's Medicare HMOs. In particular, it is alleged that defendants knew or recklessly disregarded that United HealthCare had expanded its Medicare HMO business into numerous counties with low reimbursement rates, and that, rather than becoming profitable in the second quarter as defendants had conditioned the market to expect, the Company's Medicare HMOs were operating at a loss in fully two- thirds of the 24 markets in which the Company maintained Medicare HMOs.
The Complaint further alleges that, as an integral part of the fraudulent scheme, defendants McGuire and Koppe sold over $22 million of their United HealthCare common stock at artificially inflated prices while in possession of material non-public information. On Aug. 6, 1998, United HealthCare shocked the market, announcing that the Company would be taking a $900 million charge in the second quarter of 1998, a large part of which was related to previously undisclosed, severe problems in
United HealthCare's Medicare HMO business. As alleged in the Complaint, barely two months earlier, defendants had stated that there were "no problems" in the Company's Medicare business. The Complaint also alleges that, as a result of defendants' violations, the market price of United HealthCare Corp. stock fell by almost 30% in one day, from $52 7/8 at the close of trading on Aug. 5, 1998 to $37 7/8 on Aug. 6, 1998.