Major health insurer UnitedHealth Group and three of its senior executives were sued by pension funds California Public Employees' Retirement System, Sacramento (as lead plaintiff) and City Of Hollywood (Fla.) Firefighters’ Pension Fund, among others, for alleged securities fraud and insider trading.
Originally filed on May 14 by Hollywood Firefighters, the lawsuit alleges that UnitedHealth Group CEO Andrew Witty, UnitedHealth Group executive chairman Stephen Hemsley and Brian Thompson, the CEO of UnitedHealthcare, a subsidiary of UnitedHealth Group, sold tens of millions of dollars of their stock in October 2023 after the Department of Justice had re-opened an antitrust investigation into the company.
The DOJ probe was in connection with the January 2021 planned acquisition of Change Healthcare, a healthcare technology and payment processing firm, which it sought to merge with its Optum Insight data analytics subsidiary.
Thompson was murdered by a gunman in midtown Manhattan on the morning of Dec. 4.
The latest probe was the second by the DOJ into the United Health-Change Healthcare merger, but would not be public knowledge until months later. On Feb. 24, 2022, the DOJ first filed suit against UnitedHealth Group, charging the proposed combination of Change and Optum would give the parent company a “vast amount of its rival health insurers’ competitively sensitive information,” and grant UnitedHealth use of its rivals’ “information to gain an unfair advantage and harm competition in health insurance markets.”
As a result, UnitedHealth Group said it would establish a firewall to separate data between the Change and Optum units post-merger.
The suit by CalPERS and other pension funds would later allege that UnitedHealth never set up the firewalls between its subsidiaries as it had earlier promised.
In September 2022, the U.S. District Court in the District of Columbia permitted United Health Group’s acquisition of Change, rejecting the antitrust arguments.
Probes by DOJ
However, the suit by CalPERS noted that on Oct. 10, 2023, UnitedHealth received notice that the DOJ had launched a “‘non-public antitrust investigation into the company.’” Concealing this information from investors and the public, the aforementioned United Health executives sold more than $100 million of their own UnitedHealth stock at “artificially inflated prices as the market and other investors remained unaware of the new federal antitrust investigation.”
Specifically, the suit alleged, Witty sold $102 million of his shares, while Thompson sold $15 million worth of shares, after they found out the federal inquiry was re-opened in October of that year– something that investors and the public were not aware of at the time.
Subsequently, on Feb. 27, the WSJ reported the DOJ had re-opened its probe into UnitedHealth’s acquisition of Change. UnitedHealth shares plunged by $27 per share on the very day the article was published.
CalPERS amended lawsuit
An amended lawsuit was filed on Oct. 4, 2024, with CalPERS as the lead plaintiff.
The suits, filed in the U.S. District Court in the District of Minnesota (the state where UnitedHealth is based), claims to represent plaintiffs who purchased UnitedHealth shares between Mar. 14, 2022 (the first trading day after UnitedHealth filed its answer to the allegations in the initial complaint filed by the DOJ) and Feb. 27, 2024 (the date when an article in the Wall Street Journal first publicized the re-opened DOJ probe).
The plaintiffs are seeking compensatory damages as well as a jury trial to ascertain the amount of compensation. A spokesperson for CalPERS said that as the case is still pending, they would not comment on the litigation. Hollywood Firefighters Pension has $300 million in assets. CalPERS has $522.4 billion in assets under management.
According to its latest annual report, CalPERS owned 2.3 million shares of United Health stock valued at about $1.1 billion as of June 30, 2023.
A spokesperson for Klausner, Kaufman, Jensen & Levinson, the law firm representing Hollywood Firefighters, said Hollywood Firefighters is a passive class member in the suit.
Robbins Geller Rudman & Dowd, the legal firm representing CalPERS, could not be reached for comment.
An official at Hollywood Firefighters declined to comment. United Health could not be reached for comment.
