UnitedHealth Group paying millions in settlement over alleged mismanagement of 401(k) options for employees

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“Rex’s request for balance of trade ledgers and his statement to Wells Fargo about jumping in front of a freight train, to name two instances, show the injection of business interests into the plan selection process,” Tunheim wrote.

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The judge noted a debate between the parties about whether the email statement was hearsay, and therefore not admissible, but wrote: “The loyalty issue is not a particularly close call, and the court would deny summary judgment even absent the email.”

UnitedHealth Group argued the Wells Fargo funds outperformed peers when accounting for an investment approach that traded lower risks for lower rewards. Plaintiffs countered other funds would have generated hundreds of millions of dollars in additional investment profits — and that UnitedHealth short-circuited an internal effort to change vendors.

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In October 2014, an outside consultant recommended UnitedHealth evaluate other options and an internal investment committee two years later considered proposals from six candidates and ranked Wells Fargo at the bottom. Yet UnitedHealth ultimately decided in June 2017 to retain the Wells Fargo funds.

The company defended the decision by noting a leadership change in the bank’s asset-management business plus its strong position for negotiating a lower price from Wells Fargo. Plaintiffs said a prudent fiduciary would have moved much faster to make a change; they also highlighted how Rex was appointed to the investment committee evaluating options.

“Consideration of United’s relationship with Wells did not end with Rex,” Tunheim wrote in March. “Rather, the committee received word that United executives, including its president David Wichmann, needed to be preemptively informed which companies would be selected as finalists. A committee member later warned of escalation to executives, including Wichmann, if Wells was not selected.”

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