- UnitedHealth Group Inc.’s CFO John Rex was named as an individual defendant in an amended class-action lawsuit against the healthcare and insurance company, according to a filing Wednesday.
- The lawsuit, originally filed last year, asserts Rex and UnitedHealth executive leadership kept Wells Fargo Target Suite fund as the default investment for employees’ retirement plans, despite it being one of the worst performing investment options in the entire market, according to a press release.
- A UnitedHealth spokesperson in an emailed response to a CFO Dive request for comment said there is no basis to the claims and that the allegations against Rex are without merit. “...Nothing in the law supports using hindsight and apples-to-oranges comparisons to question good faith investment decisions made in the best interests of retirement plan participants, which generated hundreds of millions of dollars in retirement income for our employees while reasonably aiming to protect them from outsize losses in bear markets,” the spokesperson wrote.
Kim Snyder, a former nurse for the company, first filed a proposal for a class-action suit in April 2021 on behalf of herself and other plan participants. In February 2022, the court classified the proposal as a class-action complaint, said the class counsel lawyers at Sanford Heisler Sharp who are representing the plaintiff.
Rex joins fellow defendants UnitedHealth Group, CEO David Wichmann, The Board of Directors and the Group Employee Benefits Plans Investment Committee who are alleged to have failed to uphold the Employee Retirement Income Security Act (ERISA) when selecting target date funds for employees retirement plans, the filed complaint said. ERISA sets minimum standards for voluntarily established retirement and health plans and provides protections for individuals in these plans.
When selecting investments companies must demonstrate prudence and loyalty towards the interests of plan participants, said Alexandra Harwin, partner at Sanford Heisler Sharp in an interview.
UnitedHealth’s executive leadership put the company’s lucrative business with Wells Fargo first and the upholding of ERISA second, per the instruction of Rex, said the complaint. The finance chief has been at the Minnetonka, MN-based company since 2016.
In November 2016, the Investment Committee presented to Rex and Executive Vice President Margaret-Mary Wilson the results of two years of analysis which outlined their decision to remove Wells Fargo Target Suite fund from the plan and replace it with another target date fund provider, said the complaint.
With knowledge that Wells Fargo was a key business partner of the company, Rex intervened and blocked the decision to remove their target suite fund from the plan, said the complaint. Shortly after this intervention, Rex found himself in one of five seats on the Investment Committee — despite having no apparent fiduciary training.
“We are alleging that UnitedHealth and John Rex used the plan as a bargaining chip in its business dealings with Wells Fargo,” said Charles Field, chair of Sanford Heisler Sharp’s Financial Services Litigation Practice Group in an interview. Harwin said these kinds of investment decisions are not typically made at the CFO level.