Caremark CEO stock options at $211 million; comments from Sondra Stratton and John Curry

From Sondra Stratton: It IS really time we do something about this. STRS's employees don't want this as it will be TOO MUCH work for them!!! I doubt that some of the other retirement systems want it as badly as we do. My brother had a light heart attack over the weekend and we went to see about him on Sunday. He showed me his medical booklet. He didn't know about having a mail in prescription company and I was trying to explain it to him. PERS active member's co pay for generic in store is $5 and 90 days mail in was $10 compared to our $20. The highest for any of the drugs was $50. Everything was 1/2 or more of what ours is. Something wrong with this picture and I think it is high time we get Damon and others on the stick about this!!!!!!!!! The longer it goes the more money we lose on this CADILLAC medical plan!

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From John Curry: If the State of Ohio had their own Rx distribution program for government employees/retirees, they wouldn't have to worry about "backdating" $211 million dollars in stock options - would they? Maybe the stakeholders might be able to save a few $$ on Rx since the profit motive would not be a critical factor in "doing business." Think about that the next time you send in a co-pay to Caremark. John

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Caremark CEO stock options at $211M

The Tennessean, May 21, 2006

Associated Press

NASHVILLE, Tenn. - The president and CEO of Caremark Rx Inc., a pharmacy benefits management company that is under federal investigation, has received a total of about $211 million from stock-option sales, according to an analysis by The Tennessean newspaper.

In two of the seven years that Caremark's board of directors granted stock options to Mac Crawford, they did so the same day that the stock hit a 52-week low for the year, the newspaper reported.

The Nashville-based company was named last week in a federal investigation into corporate stock option programs.

Prosecutors appear to be looking into whether companies had backdated stock option grants to their executives to coincide with low stock prices.

Crawford, the company's chairman, president and chief executive officer, denies having received backdated stock option grants. He told The Tennessean on Saturday that the company plans to cooperate fully and "hopefully get this behind us soon."

Caremark officials did not return phone messages to their offices Sunday.

Stock options are rights granted by a company to purchase shares at a certain price, allowing holders to benefit if the stock price rises.

Backdating involves picking a date in the past when the stock was particularly low, which would allow executives to buy low and sell high.

During Crawford's eight-year tenure as CEO, Caremark's stock price has increased 280 percent, according to the Tennessean.

Crawford's $211 million from Caremark stock-option sales were in addition to his annual compensation - including base pay and any bonus - which last year was $4.9 million.

The newspaper's analysis of the company's proxy statements and other filings show that in one case, Crawford received a block of 3.875 million stock options in lieu of an annual bonus for four years.

According to Securities and Exchange Commission filings, those options were granted at a price of 15 percent over the closing price for March 8, 2000 - a day that the price tied for the year's low at $3.88 per share.

In another example from March 1, 2005, Crawford was granted 750,000 options at a price of $37.92, the same day the share price hit its annual low.

The grant was disclosed to shareholders two days after it was made, in accordance with new SEC guidelines implemented in 2002. Analysts have said that this would make it impossible to backdate the options.

The company waited longer to disclose the March 8, 2000, grant, which was done April 12. The timing of the disclosure was within SEC regulations at that time, and an analyst has said the monthlong window would not have allowed much time to backdate options.

When Crawford arrived at Caremark in March 1998, he received a block of 3.25 million stock options priced at $10, which were repriced nearly five months later at $3.25 per share.

That was in a year that saw the share price swing from a high in January of $21.62 to its historic low of $1.69, almost exactly one month after Crawford's shares were repriced.

Caremark officials said Thursday that they had received a grand jury subpoena from the U.S. attorney for the Southern District of New York for records about its stock options. The company said it also had received a letter of informal inquiry from the SEC.

Besides Caremark, the U.S. attorney subpoenaed records from Minnesota-based UnitedHealth Group Inc. and two information technology companies - SafeNet Inc. of Baltimore and Dallas-based Affiliated Computer Services Inc. - on the same subject.

The SEC's request to Caremark concerned documents about its executive relocation program. The company moved its headquarters from Birmingham to Nashville in 2003.

A proxy report issued by Caremark last month states that Crawford received an "equity advance" of $2.9 million to cover the sale of his house in Birmingham, which has not yet been sold. He was among several Caremark executives who were offered a relocation package.

Caremark spokeswoman Joan Gallagher said Crawford has purchased a home in the Nashville area that is being remodeled.

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