Subpoenas Issued in Stock Option Investigation

Pharmacy benefits manager Caremark Rx Inc. (CMX) said Thursday that it has received a federal grand jury subpoena for records about its stock options, a day after UnitedHealth Group Inc. (UNH) was subpoenaed on the same subject.

Caremark also received what it called an "informal inquiry" from the Securities and Exchange Commission, requesting information about the company's stock options and its relocation program.

Caremark said it will cooperate with both requests. A company spokeswoman did not return a call seeking comment.

Two information technology companies, SafeNet Inc. of Baltimore and Dallas-based Affiliated Computer Services Inc., also said Thursday the U.S. Attorney in New York has issued subpoenas for information about stock options they had granted.

Nashville-based Caremark provides drug benefit services to more than 2,000 health plan sponsors and their participants throughout the United States.

UnitedHealth Group Inc., based in Minnetonka, Minn., said it received a subpoena Wednesday from the U.S. attorney in New York for documents related to stock options granted by the company.

In a related probe, the Internal Revenue Service is seeking documents from 2003 to the present relating to stock options and other compensation for executive officers named in the company's annual proxy statements, UnitedHealth said.

Previously, UnitedHealth had maintained that it handled options granted to Chairman and CEO William McGuire and other executives appropriately.

McGuire's $1.6 billion in unexercised stock options have spurred attention because of their timing. Some of the options were dated at low spots in UnitedHealth's share price — something that wouldn't have been clear until after the fact.

Thursday's announcement by Caremark came a day after the company said it had fired its auditor KPMG and hired Ernst & Young. Caremark did not say why it had dismissed KPMG, but said in an SEC filing that it had no accounting disagreement with the firm.

The Wall Street Journal last week reported that Caremark's chairman, president and chief executive, Mac Crawford, took part in the company's relocation program when it moved its headquarters from Birmingham, Ala., to Nashville in 2003.

Under that program, a relocation company bought the homes from some employees, passing on any gains or losses to Caremark.

Crawford was given a $2.9 million "equity advance," but has yet to sell his house in Alabama. A Caremark spokesman told the paper that Crawford's ill wife still lives there and that the home will be sold when renovations on the Crawfords' Nashville home is complete.

Crawford has sold $185 million worth of stock since October and holds another $184 million in unexercised stock options, the paper reported.

Caremark's release mentioned neither Crawford's relocation or stock options in relation to the subpoena from U.S. Attorney for the Southern District of New York or the SEC letter. Neither the prosecutor's office nor the SEC returned calls late Thursday.

Caremark's clients include corporate health plans, managed care organizations, insurance companies, unions and government agencies.