Tuesday, October 31, 2006
Cooperation is the watchword in the options back-dating cases, as corporations almost fall all over themselves promising to provide any necessary assistance to the SEC and U.S. Attorney's Offices that have come knocking on their doors. When the company's internal investigation hits a roadblock, then the individual is usually shown the door, which can even happen to a company's former CEO and current board member. Monster Worldwide, Inc. announced that "[o]n October 29, 2006, Andrew J. McKelvey resigned as a member of the Board of Directors of Monster Worldwide, Inc., effective immediately. Mr. McKelvey also resigned immediately as Chairman Emeritus of the Company. Mr. McKelvey’s counsel advised the Special Committee of the Board reviewing stock option grants that Mr. McKelvey had declined to be interviewed by the Special Committee on the previously agreed date and Mr. McKelvey would not provide assurance that he would appear at a later date." Interesting that someone would resign on a Sunday, not a normal business day.
An 8-K filed by Monster Worldwide includes a letter (here) from McKelvey's lawyer -- who is no doubt being paid by the company -- to the law firm conducting the internal investigation explaining the reason why his client would not be appearing for the interview and would not do so in the near future:
It had been our hope that notwithstanding our recent entry into the case we would be able to provide you with at least a preliminary assessment of the facts within the existing schedule. We have come to conclude, however, that despite our best efforts, and despite the valuable assistance you have provided in the form of documents and information, we need a good deal more time to get up to speed on this fact-intensive matter that covers a period of many years. As a result, I have reluctantly decided that we cannot go forward with tomorrow’s meeting. And, notwithstanding Mr. McKelvey’s desire to help, as his lawyer I cannot provide you with assurances that you will be able to have such a meeting with him in the future. You and outside counsel for the company have told us about certain topics that are a priority for you and we are ready to try to find a way to provide you with whatever information we can. I hope you will agree at least to proceed in that way. Once again, I regret that we are unable to meet tomorrow, but hope you understand the difficult situation we face and the fact that we cannot effectively represent our client when we do not have a firm grasp on the facts of the case.
Because Mr. McKelvey understands that my inability to meet with you is contrary to the wishes of the Special Committee, and because he continues to have the best interests of the company very much at heart, he today has submitted with regret his resignation as a Director of Monster Worldwide, Inc. and as Chairman Emeritus.
No one actually believes the second paragraph, but it sure sounds nice. This would not be an interesting story, except for the final paragraph of the letter -- also dated October 29, which means there were lots of those nice weekend billable hours. The letter discusses a meeting over the summer between counsel conducting the internal investigation and McKelvey that may have involved some answers that, in hindsight, might be construed as less than completely correct:
During your meeting, Mr. McKelvey was asked questions that he understood were designed to assess whether people in the company had engaged in improper options “backdating,” and whether he knew that such a practice was improper when it occurred. In retrospect, he recognizes that he misunderstood your questions and focused too narrowly on the issue of whether he knew at the time that improper conduct had occurred, and not on the more general issue of whether backdating had occurred. During the time period relevant to your questions, he did not understand that it was improper for the exercise price of stock options to be different than the price on the grant dates, nor did he understand that there were legal or accounting implications associated with that difference. Mr. McKelvey hopes that this clarifies any misperceptions that may have been created during his meeting with you in July.
I think this is a bit of an Emily Litella moment -- "never mind" -- or the equivalent in golf of a mulligan. Monster Worldwide has not issued its final report on options practices at the company, but McKelvey's counsel may be looking down the road at how the SEC and U.S. Attorney's Office views the conclusions of the internal investigators. Being branded as less-than-truthful is not how lawyers want their clients portrayed. Peter Lattman on the Wall Street Journal Law Blog has an interesting post (here) on McKelvey's resignation. (ph)