United Healthcare 2006 Annual Report Download - page 59

Regulatory Inquiries
The SEC is conducting a formal investigation into the Company’s historic stock option practices. In May 2006,
the Company received a request from the Internal Revenue Service seeking documents relating to stock option
grants and other compensation for the persons who from 2003 to the present were named executive officers in the
Company’s annual proxy statements. We also received a subpoena from the U.S. Attorney for the Southern
District of New York in May 2006 requesting documents from 1999 to the present relating to the Company’s
historic stock option practices. In June 2006, the Company received a Civil Investigative Demand from the
Minnesota Attorney General requesting documents from January 1, 1997 to the present concerning the
Company’s executive compensation and historic stock option practices. We have also received document
requests from U.S. Congressional committees in connection with these issues. We have not resolved any of these
matters. We cannot provide assurance that the Company will not be subject to adverse publicity, regulatory or
criminal fines or penalties, as well as other sanctions or other contingent liabilities or adverse customer reactions
in connection with these matters. See Item 7 — “Legal Matters” for a more detailed description of these inquiries
and document requests.
Litigation Matters
We and certain of our current and former directors and officers are defendants in a consolidated federal securities
class action, an ERISA class action, and state and federal shareholder derivative actions relating to our historic
stock option practices. We also have received several shareholder demands relating to our historic stock option
practices. Our Board of Directors has designated an unaffiliated Special Litigation Committee, consisting of two
former Minnesota Supreme Court Justices, to investigate the claims raised in the derivative actions and
shareholder demands, and determine whether the claims should be pursued.
In addition, following our announcement that we would delay filing our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006, we received a purported notice of default from persons claiming to hold certain of
our debt securities alleging a violation of the indenture governing our debt securities. Subsequently, we filed an
action in the U.S. District Court for the District of Minnesota, seeking a declaratory judgment that the Company
is not in default under the terms of the indenture. The Company subsequently received a purported notice of
acceleration from these holders who previously sent the notice of default that purports to declare an acceleration
of the Company’s 5.80% Senior Unsecured Notes due March 15, 2036, of which an aggregate of $850 million
principal amount is outstanding.
In connection with the departure of William W. McGuire, M.D., our former Chairman and Chief Executive
Officer, we received an order from the U.S. District Court for the District of Minnesota in November 2006
granting a joint motion for temporary injunctive relief made by plaintiffs and Dr. McGuire. According to the
order, Dr. McGuire is preliminarily enjoined from exercising any Company stock options without Court
approval, and the Company and Dr. McGuire are preliminarily enjoined from taking any further action pursuant
to or having any effect on Dr. McGuire’s employment agreement, as amended, and other related agreements, and
while the preliminary injunction is in effect, no payments will be made to Dr. McGuire under these agreements,
including any payments under Dr. McGuire’s Supplemental Employee Retirement Plan.
These actions are in preliminary stages, and we cannot provide assurance that their ultimate outcome will not
have a material adverse effect on our business, financial condition or results of operations. See Item 7 — “Legal
Matters” for a more detailed description of these proceedings and shareholder demands.
In addition, we may be subject to additional litigation or other proceedings or actions arising out of the
Independent Committee’s review, the Special Litigation Committee’s review and the related restatement of our
historical financial statements. Litigation and any potential regulatory proceeding or action may be time
consuming, expensive and distracting from the conduct of our business. The adverse resolution of any specific
lawsuit or any potential regulatory proceeding or action could have a material adverse effect on our business,
financial condition and results of operations.
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