Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, May 18, 2009

SEC and Monster Worldwide Settle Backdating Charges

The SEC and Monster Worldwide, Inc. settled charges that Monsster engaged in a multi-year scheme to secretly backdate stock options granted to thousands of Monster officers, directors and employees. Monster agreed to pay a $2.5 million penalty to settle charges that the company defrauded investors by granting backdated, undisclosed "in-the-money" stock options while failing to record required non-cash charges for option-related compensation expenses.

The SEC's complaint alleges that in connection with this scheme, Monster filed false and materially misleading statements concerning the true grant date and exercise price of stock options in its annual, quarterly and current reports, proxy statements and registration statements. Many of these documents also falsely represented that stock options were being granted at fair market value. Further, Monster failed to record and disclose the compensation expense associated with the "in-the-money" portion of stock option grants. As a result, Monster materially overstated its quarterly and annual earnings in its financial statements and was required to restate its historical financial results for 1997-2005 in a cumulative pre-tax amount of approximately $339.5 million to record additional non-cash charges for option related compensation expenses.

Without admitting or denying liability, Monster agreed to be permanently enjoined from securities law violations as well as the $2.5 million penalty. The Commission took into account the cooperation that Monster provided Commission staff during the course of the investigation.

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