CORPORATE CRIME REPORTER
Former
Monster CEO Settles SEC Options Backdating Charge
22 Corporate Crime Reporter
4, January 23, 2008
Andrew J. McKelvey, the former CEO Monster Worldwide, Inc., settled charges
brought by the Securities and Exchange Commission (SEC) that he participated
in a scheme to secretly backdate stock options granted to Monster officers,
directors and employees.
Under the agreement with the SEC, McKelvey will pay $275,989.72 in disgorgement and prejudgment interest, will be barred from serving as an officer or director of a public company, and will be enjoined from violations of the anti-fraud, reporting and other provisions of the federal securities laws.
The SEC said in a statement that “the settlement does not include a civil penalty due to overriding personal circumstances related to McKelvey.”
The Journal reported that the deals reflect McKelvey's poor health.
He has pancreatic cancer and his prognosis is poor and it is unclear whether he would be alive to face trial – the Journal reported.
McKelvey was represented by Steven F. Reich of Manatt, Phelps & Phillips in New York and Andrew C. DeVore of DeVore & DeMarco in New York.
The Wall Street Journal is reported that federal prosecutors in Manhattan have cut a deferred prosecution deal with McKelvey.
The SEC alleged that beginning in 1997, McKelvey and others backdated stock option grants to coincide with the dates of low closing prices for Monster’s common stock, resulting in grants of in-the-money options to numerous individuals.
McKelvey understood that backdating options to coincide with low closing prices for Monster stock without recognizing a compensation expense was contrary to accounting rules and contrary to representations in Monster's SEC filings.
The SEC alleged that McKelvey caused Monster to misrepresent in its periodic filings and proxy statements filed with the Commission that all stock options were granted at the fair market value of the stock on the date of the award.
This was not the case.
McKelvey also caused Monster to file materially misstated financial statements with the Commission in its Forms 10-K and 10-Q that did not recognize compensation expense for the company's stock option grants, as required by generally accepted accounting principles.
As a result, Monster overstated its aggregate pretax operating income by approximately $339.5 million, for fiscal years 1997 through 2005.
Although
McKelvey did not receive backdated options, he benefitted from the scheme by
granting backdated options to four individuals he personally employed, including
three pilots and a mechanic.
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