UnitedHealth Pays the Price

McDonald has an overweight recommendation and a $63 price target on UnitedHealth's shares. His firm hopes to secure investment banking business from the company over the next three months.

Despite the huge management shakeup -- and yet another regulatory filing delay -- UnitedHealth's stock barely moved at all on Monday. The shares, hammered in the past on much smaller developments, fell just 19 cents to $48.56 on Monday morning.

Damaged Goods

Still, some experts felt rattled by the damaging report.

"'Appalled' is the right word," declared Sheryl Skolnick, senior vice president of CRT Capital Group. "'Sickened' is another. ... For a company that has held itself up to be so pristine -- and then for it to turn out to be no better than anybody else in these option-dating fiascos -- makes it doubly troubling."

Independent reviewers determined that UnitedHealth had, in fact, backdated most of the stock-option grants the group had studied. They cited serious problems with huge grants made to McGuire and Hemsley in particular. They also raised questions about repriced stock options that had never been properly disclosed. Moreover, they determined that the company -- as a matter of policy -- had regularly backdated stock options given to employees who had just been hired or promoted.

McGuire and Hemsley agreed to let the company reprice some of their past stock-option grants from the lowest to the highest closing price of the year following the report.