Friday, February 20, 2009
On February 19, the SEC, pursuant to Rule 102(e) of its Rules of Practice, issued an order (the Rule 102(e) Order) suspending former UnitedHealth Group, Inc. General Counsel David J. Lubben from appearing or practicing before the Commission as an attorney for three years. On Jan. 23, 2009, Lubben was permanently enjoined by the United States District Court for the District of Minnesota from violating various federal securities laws, including several antifraud provisions, and was suspended by the Commission on that basis. Lubben consented to the suspension without admitting or denying the Rule 102(e) Order's findings, except he admitted to the U.S. District Court's entry of the injunction.
In its civil action filed in U.S. District Court, the Commission charged Lubben with participating in a stock option backdating scheme at UnitedHealth. According to the Commission's complaint, Lubben or others acting at his direction created false or misleading company records indicating that stock option grants by UnitedHealth had occurred on dates when the company's stock price had been at a low. Lubben personally received numerous backdated grants of options, representing as many as 3.8 million shares of UnitedHealth stock on a split adjusted basis. He exercised approximately 1.8 million of those options for approximately $1.1 million in gains attributable to improper backdating.
Without admitting or denying the allegations, Lubben consented to the entry of an order, which, among other things, permanently enjoins him from violating the antifraud provisions of the federal securities laws and bars him from serving as an officer or director of a public company for a period of five years. The U.S. District Court also ordered Lubben to pay a $575,000 civil penalty. See Litigation Release No. 20836 (Dec. 22, 2008). The Court's Order further provides that Lubben's disgorgement and prejudgment interest would be deemed satisfied by his voluntary repricing of his UnitedHealth stock options, which reduced the value of those options by approximately $2.7 million, and his payment of approximately $630,000 in pending settlements to resolve derivative and shareholder lawsuits related to options backdating filed against Lubben in state and federal courts in Minnesota.