Options fiasco deepens

MINNEAPOLIS — UnitedHealth Group Inc. warned investors on Wednesday that its stock option fiasco will cost much more than the $286 million it previously estimated, and said it would restate earnings all the way back to 1994.

The company’s chief financial officer also resigned but will be assuming unspecified operational duties at the nation’s second largest health insurer.

UnitedHealth said it has found problems with its handling of stock options as late as the end of 2005.

The company said it expects to take paper losses on prior earnings to account for stock options, and that it would take cash charges to pay the potential tax bill. It said it doesn’t yet know how much those charges will be.

In May, UnitedHealth estimated that options-related restatements could slice $286 million from earnings from 2003 to 2005. On Wednesday it said it anticipates the final figure “will be significantly greater” than that.

Last month, a company-sponsored investigation concluded that stock options awarded to then-Chairman and CEO William McGuire were probably backdated. That means they weren’t really issued when the company originally said they were — handing an instant profit to their recipients, especially McGuire. McGuire resigned as chairman and the company has said he will step down as CEO by Dec. 1. On Wednesday UnitedHealth spokesman Mark Lindsay said McGuire hasn’t left yet, and that the final terms of his departure are still being negotiated.

McGuire and the company have worked out a written agreement to reprice his options to the highest point of each year between 1994 and 2002. That will cut about $200 million out of the value of McGuire’s stock options, according to McGuire attorney David Brodsky.

UnitedHealth reported that McGuire had $1.78 billion in stock options as of the end of 2005.