Today Major League Soccer is expected to announce it's awarding a new franchise to an ownership group led by a man whose prior corporate misconduct was bad enough to get him banned from running a public company for 10 years.
Former UnitedHealth Group CEO Bill McGuire saved professional soccer in the state when he bought the Minnesota Stars in 2012 and has used his personal fortune for a number of worthy charitable causes, like creating a scholarship fund at the U of M, and donating land for Gold Medal Park downtown. But let's not forget he became the poster child for shady CEO payouts and outrageous golden parachutes after he resigned from UnitedHealth in disgrace in 2006. See also: Bill McGuire Buys Minnesota Stars
For more than a decade McGuire accumulated a fortune in stock options as UnitedHealth rose from $600 million company to a Wall Street darling worth more than $70 billion under his leadership.
Stock options give recipients a right to buy company stock at a set price, called the exercise price or strike price. The lower the price is on the day the options are granted, the more money the recipient stands to make. The Wall Street Journal explains in the 2006 story that blew the lid off of McGuire's long-running scam:
Which day's price the options carry makes a big difference. Suppose an executive gets 100,000 options on a day when the stock is at $30. Exercising them after it has reached $50 would bring a profit of $20 times 100,000, or $2 million. But if the grant date was a month earlier and the stock then was at, say, $20, the options would bring in an extra $1 million.
A key purpose of stock options is to give recipients an incentive to improve their employer's performance, including its stock price. No stock gain, no profit on the options. Backdating them so they carry a lower price would run counter to this goal, by giving the recipient a paper gain right from the start.
McGuire routinely backdated his stock options at historically low prices, at one point allowing him to execute "one of the most lucrative stock-option grants ever" in 2001.
The Securities Exchange Commission brought the hammer down on McGuire in 2007, forcing him to give back about $620 million of his ill-gotten fortune and banning him from running a public company for 10 years.
But he was still allowed to walk away with $800 million in stock options the SEC deemed legit, along with the more than $500 million he pocketed for running the company for 15 years. This is how he's able to throw huge sums of money at pet causes like professional soccer.
Vikings owner Zygi Wilf might be the most hated man in the state. After all, the New Jersey real estate baron has been found guilty of systematically cheating business partners and also has the gall to do things like charge the state to store dirt from a stadium construction project receiving $500 million in public subsidies.
But McGuire's no saint either, and we should remember that if he comes looking for a handout to help build a stadium for his latest charitable (and potentially very profitable) endeavor.
Click to page two to read the SEC's charges against McGuire.
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