In a case likely to be closely watched by other companies ensnared in stock option scandals, the Securities and Exchange Commission settled charges Monday against UnitedHealth Group Inc. without penalty.

The SEC alleged that UnitedHealth concealed more than $1 billion in stock option compensation between 1994 and 2005 by giving senior executives and other employees "in-the-money" options to buy shares by secretly backdating the grants to avoid reporting the expenses to investors.

But in a court filing Monday, the SEC said it won't charge the company with fraud or seek a monetary penalty, "based on the company's extraordinary cooperation in the Commission's investigation, as well as its extensive remedial measures."

These measures included sharing the findings with the government of an internal investigation, removing senior executives and board members, voluntarily re-pricing the options, putting in place new safeguards against fraud and settling two class-action shareholder lawsuits.

As part of the settlement, without admitting wrongdoing, Minnetonka-based UnitedHealth agreed not to violate federal securities laws related to reporting and accounting.

However, former general counsel David Lubben must pay a $575,000 civil penalty to the SEC and is barred from serving as an officer or director of a public company for five years.

The SEC previously had fined former Chief Executive William McGuire $7 million, the largest civil penalty against an individual in a stock option backdating case. The commission also barred him from serving as an officer or director of a public company for 10 years.

By letting the company off the hook but fining the two executives, "the SEC is sending a fairly compelling message," said Elizabeth Nowicki, associate professor of law at Tulane University, who specializes in corporate governance and securities regulation.

"If indeed there was backdating by officers but the company and board immediately responds, that will go far for purposes of [avoiding] charges in the future against the corporate entity," Nowicki said.

Monday's settlement must be approved by the U.S. District Court in Minnesota.

Chen May Yee • 612-673-7434