Thursday, November 09, 2006

Institute of Medicine's Big Error

Today's Wall Street Journal reports that Unitedhealth's chief executive William W. McGuire and his successor, Stephen J. Hemsley have agreed to pay back $390 million to Unitedhealth in an attempt to avoid "even the appearance of any unintended benefit from any past option grants." Of that amount, $200 million will come from Mr. McGuire - a fairly paltry portion (11.4%) of his $1.75 billion in total options issued. And worse still:
His attorney, David Brodsky, said, "Dr. McGuire is pleased to have reached an agreement to reprice his options. The agreement to forgo approximately $200 million means that Dr. McGuire will receive no benefit at all from dating issues in connection with his options."

But Dr. McGuire hasn't yet agreed to forfeit the reactivated options in which he and other employees were effectively able to get the same options twice, at favorable prices. For Dr. McGuire alone, those extra options are now valued at about $250 million. The issue of those options hasn't been resolved between Dr. McGuire and the company, according to people familiar with the situation.
Earth to Mr. Brodsky: sounds like there's still some benefit in there to me.

And what about the deficit that Mr. McGuire has caused to Unitedhealth's shareholders? If past history is any indication, anything where Mr. McGuire is "pleased to have reached an agreement" probably means he's still getting away with millions.

As such, should he really continue with the Institute of Medicine as a member of the National Institutes of Health National Cancer Policy Board? I suppose this is one medical error we'll never hear about from the Insititute of Medicine now will we?


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