updated 9/10/2008 5:02:45 PM ET 2008-09-10T21:02:45

Former UnitedHealth Group Chief Executive William McGuire will pay $30 million and return stock options representing more than 3 million shares to settle a class-action lawsuit.

The litigation was led by the California Public Employee Retirement System, also known as CalPERS, and the parties involved had been preparing for a trial later this month in U.S. District Court in Minnesota.

A statement from McGuire says the former CEO will pay the money to a fund for the benefit of the class, and he'll return 3.7 million shares to UnitedHealth.

The $30 million will be added to the $895 million the insurer UnitedHealth agreed to pay earlier this year to settle a separate lawsuit also involving stock options.

The size of McGuire's settlement is "pretty amazing," according to Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. He added that getting a CEO to settle like that is a "significant accomplishment."

"It doesn't happen very often," he said.

McGuire's statement said he continues to deny the allegations in the class-action complaint, but he was pleased "to help bring the stock option dating issues closer to complete resolution."

His spokesman, Bob Chlopak, said the former CEO would not be available for further comment.

McGuire stepped down in 2006 after disclosures that stock options granted to him and others at UnitedHealth had not really been issued when the company said they were. Granting stock options retroactively allowed the company to look back and pick a date when its share price was lower, thus locking in an instant profit.

UnitedHealth also announced the retirement of General Counsel David J. Lubben along with McGuire's resignation in 2006. A statement released Wednesday by CalPERS said the settlement also calls for a $500,000 payment from the former general counsel.

Lubben's representatives did not return immediate calls from The Associated Press seeking comment.

CalPERS spokeswoman Pat Macht said they were "very satisfied with the settlement.

"We think it's large enough that it should send a strong message to chief executive officers of any companies that decide that they want to try to do something that is less than good corporate governance," she said.

UnitedHealth spokesman Don Nathan declined to comment on the McGuire settlement.

Shares of UnitedHealth added 83 cents, or 2.9 percent, to $29.30 in afternoon trading.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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