UnitedHealth Group is under fire—not just from regulators, but now also from its shareholders. UnitedHealth Group is facing another round of shareholder lawsuits citing the alleged Medicare fraud investigation reported by The Wall Street Journal in May. Steve Silverman, a UHG shareholder since 2003, filed a second shareholder derivative lawsuit last week in U.S. District Court for the District of Minnesota.
In these shareholder derivative lawsuits, investors are demanding accountability from the company’s leadership in light of alleged billing fraud, insider trading, and failure to disclose regulatory investigations. These high-profile cases highlight the power and rights shareholders have to hold executives accountable in both publicly traded and privately held companies.
What Is a Shareholder Derivative Lawsuit?
A shareholder derivative lawsuit is a legal action brought by a shareholder on behalf of the corporation, typically against officers or directors accused of harming the company. These suits often allege:
- Breach of fiduciary duty
- Corporate waste or mismanagement
- Insider trading or self-dealing
- Failure to disclose material information
Unlike securities class actions, which seek damages for individual investors, derivative suits aim to hold corporate leaders accountable and recover losses for the company itself. Any damages awarded go to the corporation—not directly to the plaintiff.
UnitedHealth Derivative Cases: Key Allegations
Multiple shareholders have filed derivative suits in federal court against UnitedHealth’s executives and board members. These lawsuits allege things like fiduciary breaches tied to improper Medicare Advantage billing practices; failure to disclose a Department of Labor investigation into those practices; stock buybacks at inflated prices while insiders allegedly sold shares for personal profit; misleading disclosures that artificially propped up the company’s stock price until regulatory scrutiny caused a sharp decline.
These lawsuits come after the U.S. Department of Justice opened a criminal investigation into UnitedHealth’s billing activities, and the company lost billions in market capitalization.
Why Derivative Litigation Matters
Shareholder derivative suits are more than a tool for recovering financial losses—they help enforce accountability and deter future misconduct. There are several considerations any shareholder of publicly and privately held companies must consider.
For investors, these lawsuits provide a vital check on self-dealing or negligent leadership. For directors and officers, they are a powerful reminder that fiduciary duties are enforceable—even years after an alleged breach.
Implications for Other Companies
The UnitedHealth lawsuits serve as a cautionary tale for companies across industries. A few things every board of publicly or privately held companies should remember:
- Boards must proactively oversee compliance with their legal obligations and disclosure requirements.
- Stock buybacks and insider trading should be subject to heightened scrutiny during periods of material risk.
- Executive transitions and crises, including unforeseen tragedies, must be carefully managed to avoid misrepresenting material changes to investors.
- Self-dealing—using one of the directors’ or executives’ related companies to provide work should be avoided unless the proper disclosures are made and rules are followed.
As plaintiff law firms continue to monitor regulatory developments and stock performance, more derivative actions are likely to follow—especially in industries subject to intense federal oversight.
