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To fix a board gone bad, UnitedHealth Group Inc. turned to the guy who started the company's big push for profits 30 years ago.
Richard Burke, the new chairman of UnitedHealth Group, has a long history in Minnesota health care. In the 1980s, Burke ran a small company, then called UnitedHealthcare, that managed one of Minnesota's first HMOs, Physicians Health Plan (PHP). PHP eventually became Medica while UnitedHealth grew under William McGuire into the country's second-biggest health insurer.
Now, after McGuire's ouster a week ago in a stock-option scandal, Burke, 62, is presiding over a company with a badly wounded reputation and a board whose future is in doubt.
More than a dozen shareholder lawsuits await the company in federal court. The Internal Revenue Service, Securities and Exchange Commission, Justice Department and the Minnesota attorney general's office are sifting through corporate documents looking for legal violations.
"This is a board scrambling to catch up on something they let get out of control," said Patrick McGurn, executive vice president of Institutional Shareholder Services, an influentional research firm that advises large shareholders on merger proposals and corporate governance matters. "They allowed so much to happen on their watch."
"I'd be surprised if in three years any of those board members are still around," he said.
Fred Zimmerman, a recently retired professor of manufacturing at the University of St. Thomas who also has served on the board of directors at 14 corporations, described the board as woefully weak in its response to the options scandal.
"The entire compensation committee should have stepped down, also some of the lead directors," Zimmerman said.
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Backdating for profit
To some, Burke was a visionary who opened the closed walls of traditional HMOs and gave patients a greater choice of care. But to the doctors who worked for PHP, Burke was too profit-oriented, an assertion that still lingers with UnitedHealth.
"He was years ahead of the rest of the...