EXCLUSIVE: Health care pay probe hits top Interior official

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When members of Congress decided in November to start investigating the recipients of seven-figure pay packages in the health insurance industry, they may not have expected to find themselves probing a top Obama administration official.

Just months earlier, Interior Department Chief of Staff and Assistant Secretary Thomas L. Strickland had breezed through his Senate confirmation hearing without a mention of his $2 million bonus from one of the country’s biggest health care plans.

Altogether, the two-time Democratic U.S. Senate candidate in Colorado received more than $5 million in salary, bonus and stock compensation last year as the chief legal officer at UnitedHealth Group, a Minnesota-based health care plan, according to regulatory filings.

The package has come under much closer scrutiny since Sen. Tom Harkin, Iowa Democrat and chairman of the Health, Education, Labor and Pensions Committee, called on UnitedHealth and three other health care plans to provide details on executives who received more than $5 million in compensation.

The request, which did not mention Mr. Strickland by name, is part of an investigation into the industry’s rate-setting practices. A House committee is conducting a similar inquiry.

In response, UnitedHealth has turned over to Congress information about its executives’ pay, including details about Mr. Strickland’s compensation, company spokesman Don Nathan said.

Mr. Strickland was one of three top corporate officers who received more than $5 million from the company in 2008, according to the UnitedHealth’s proxy statement filed April 23 with the U.S. Securities and Exchange Commission (SEC).

He received a salary of $692,115, but his $2 million bonus, along with stock awards and other compensation, boosted his total pay for the year to $5,016,808, according to the SEC filing.

“Tom was named in the proxy so his information would have been included” in the response the company sent to Congress, Mr. Nathan said.

Mr. Strickland, through an Interior Department spokeswoman, said he hasn’t been contacted by any members of Congress who want to know more about his compensation or work for UnitedHealth.

“Interior has no regulatory or fiscal involvement with the managed care industry, including UnitedHealth. Tom has no involvement in the health care legislative debate,” Interior spokeswoman Kendra Barkoff said.

Mr. Strickland’s pay stands out among the company’s top executives. He was alone in getting a seven-figure bonus last year.

“The compensation committee awarded Mr. Strickland a bonus of $2 million because his departure date made him ineligible to receive any awards under the company’s executive incentive plan,” the company explained in its SEC filing.

David F. Larcker, director of the corporate governance research program at Stanford University, said that executives leaving companies generally forfeit claims to such unvested long-term compensation plans.

“In this case, it seems that the executive was paid in advance for what he would have received if he continued his employment. This seems unusual to me,” he said.

Mr. Strickland reported getting $2.7 million in salary and bonus money from UnitedHealth in a financial disclosure form filed March 13 with the U.S. Office of Government Ethics. He also listed stock awards, but said the value of those awards was not readily ascertainable.

He also noted that he would retain his “stock appreciation rights,” but said he would not receive any additional rights from the company after his resignation. While he would retain his UnitedHealth 401(k) account, neither he nor the company would make any further contributions, he said.

Both UnitedHealth and the Interior Department said Mr. Strickland has no plans or agreements to return to the company whenever he leaves the government.

Mr. Strickland’s nomination sailed through the Senate by a vote of 89-2. He serves as the assistant secretary for fish and wildlife and parks, as well as chief of staff for the entire Interior Department.

His ties to UnitedHealth never arose during his nomination except for a passing reference by Sen. Amy Klobuchar, Minnesota Democrat, who noted that he “worked in Minnesota so he knows our state well.” UnitedHealth is based in Minneapolis and is one of the state’s largest employers.

Mr. Strickland, who served as U.S. attorney in Colorado during the Clinton administration, testified to the Senate that he was asked to join the Interior Department in part because of his experience as a federal prosecutor. The Interior Department came under sharp criticism from Congress last year after an ethics scandal involving its Minerals Management Service.

Mr. Strickland told senators that he and Interior Secretary Ken Salazar visited the Minerals Management Service “to meet with every employee there and address these ethics and integrity issues.”

“We sent a message throughout the department that the rule of law will apply and that policy decisions will be based on science and on the appropriate considerations and not politics or special interests,” he said.

Mr. Strickland ran twice for a U.S. Senate seat in Colorado, losing in 1996 and 2002 to Wayne Allard, the Republican incumbent. He worked at the Hogan & Hartson law firm before taking the job at UnitedHealth in April 2007.

The company’s stock price dropped from about $49 per share when he arrived to $28 when he left, but he was credited with helping see the company respond to “legal and regulatory challenges,” the company said in its SEC filings.

The company’s compensation committee also credited him with rebuilding the legal department and a pro bono program across UnitedHealth.

Days before the announcement that Mr. Strickland was leaving the company, New York Attorney General Andrew M. Cuomo disclosed a $50 million settlement with UnitedHealth to resolve an investigation into the company’s billing practices.

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