Lawsuit alleges UnitedHealth failed to disclose antitrust investigation

UnitedHealth Group is facing a proposed securities fraud class-action lawsuit alleging that the company failed to disclose that the Justice Department opened an antitrust investigation into the company. 

The investigation came into the public's attention Feb. 27 when The Wall Street Journal and other news outlets reported that the Justice Department was investigating the relationships between the company's various segments, including Optum. Neither the Justice Department nor UnitedHealth has publicly acknowledged the investigation.   

As a result of the report, the price of UnitedHealth stock declined by $27 per share, "erasing nearly $25 billion in shareholder value," according to the lawsuit filed May 14 in Minnesota federal court.  

The lawsuit from the City of Hollywood Firefighters Pension Fund alleges that UnitedHealth was aware of the investigation since at least October. 

"Instead of disclosing this material investigation to investors or the public, UnitedHealth insiders sold more than $120 million of their personally held UnitedHealth shares," the lawsuit alleges. "In the four months between learning about the DOJ investigation and the investigation becoming public, UnitedHealth's Chairman Stephen Hemsley sold over $102 million of his personally held UnitedHealth shares and Brian Thompson, the CEO of UnitedHealthcare, sold over $15 million of his personally held UnitedHealth shares."

Mr. Hemsley and Mr. Thompson are named as defendants in the lawsuit. UnitedHealth Group CEO Andrew Witty, who did not sell shares, was also named as a defendant.  

The lawsuit states that in March 2022, after the Justice Department sued to block UnitedHealth Group's acquisition of Change Healthcare, UnitedHealth publicly agreed to making binding commitments to its customers and the government to maintain its robust firewall process — and extend them to Change's business — to protect sensitive customer data and provide information to customers to allow them to verify those firewall processes. 

"In truth, UnitedHealth never established proper firewalls between Optum and UnitedHealthcare as required by its own policy, and as it told the court in the antitrust action, the DOJ and investors it would do," the lawsuit alleges. "Firewalls were never properly created for certain business applications. Despite assurances to the contrary, there was never a meaningful technological separation between Optum and UnitedHealthcare that prevented the sharing of [customer sensitive information.]" 

The lawsuit seeks compensatory damages in favor of the plaintiff and other class members in an amount to be proven at trial. 

A UnitedHealth Group spokesperson told Becker's, "we believe this lawsuit is baseless and we intend to defend ourselves vigorously."

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