Friday, December 15, 2006

Monster Woldwide Fesses Up to Options Backdating

On-line employment company Monster Worldwide, Inc. disclosed that the options backdating at the company was the result of intentional conduct and not "mere oversights" by executives.  A press release (here) states:

The Special Committee has determined that the exercise price of a substantial number of stock option grants during the periods between 1997 through March 31, 2003 differed from the fair market value of the underlying shares on the measurement date. In most cases, the original date assigned to the grant corresponded to the date as of which a unanimous written consent ("UWC") was executed by the members of the Compensation Committee of the Company's Board of Directors, but the date of that consent did not correspond to the actual date on which the identities of the individual optionees and the number of shares underlying each option was determined. The Company believes that the dates as of which the UWCs were dated were earlier than the dates on which they were actually executed. In a significant number of instances, the stock price on the assigned date (the date as of which the UWC was executed) was lower, sometimes substantially lower, than the price on the date the award may be deemed to have actually been determined. The Company believes that this practice was done intentionally, by persons formerly in positions of responsibility at the Company for the purpose of issuing options at a higher intrinsic value than would have otherwise been the case.

The financial restatement triggered by the backdating will be over $300 million.  Former CEO Andrew McKelvey resigned his position because of the problem, and quit the board of directors when he decided not to meet with the law firm conducting the internal investigation for another interview (see earlier post here).  Former general counsel Myron Olesnyckyj went on paid leave in September 2006, and was fired for cause in November (see earlier post here).  The reference to "persons formerly in positions of responsibility" indicates that senior executives were involved in the backdating, and the U.S. Attorney's Office is likely privy to their identity and may pursue a criminal case now that the internal investigation is largely complete.  There has not been an indication yet that McKelvey or Olesnyckyj are targets of the grand jury investigation.  (ph)

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