UnitedHealth Sued by Subsidiary’s Ex-Director Over Stock Claim

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By Jacob Rund

A former director of a UnitedHealth Group Inc. subsidiary is suing the parent company for millions in shares he claims were withheld from him when the companies merged last year.

A lawsuit filed April 17 in Delaware Chancery Court alleges CentrifyHealth Inc. breached multiple contracts by failing to provide Richard Forman, a former board member and investor, with promised stock options and a 1 percent equity stake.

UnitedHealth acquired CentrifyHealth, a Nashville, Tenn.-based technology company, in August 2017 for about $113 per share worth of UnitedHealth stock, plus $180 in stock per share for milestone payments.

According to the complaint, CentrifyHealth’s founder told Forman he was entitled to 1 percent of the company in “founders shares” for “active participation as a board member and/or investor.” The promise was made over email and wasn’t formalized in a contract.

The lawsuit also alleges that, while on the board, Forman was authorized to receive 8,000 stock options, but he never received a copy of the option plan.

Forman resigned from the board in 2010. When he contacted the company in 2017, he was told he only held preferred shares he had purchased himself, the complaint said.

Forman “has been deprived of several million dollars, possibly close to $9 million in value in connection with the merger,” the complaint said.

The lawsuit accuses five former CentrifyHealth directors of breaching their fiduciaries duties by failing to provide details of the stock option awards and disclosing that the options would be forfeited if Forman left the board.

Forman is asking the court to force UnitedHealth to either issue him the shares he claims to have been entitled to in the merger, or for damages equal to “the highest interim value that UnitedHealth stock reaches” until the lawsuit is resolved.

A UnitedHealth spokesperson did not immediately respond to a request for comment.

The case is Forman v. CentrifyHealth Inc. , Del. Ch., No. 2018-0287, complaint filed 4/17/18 .

To contact the reporter on this story: Jacob Rund in Washington at jrund@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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