Friday, January 25, 2008
Former Monster Worldwide CEO Andrew McKelvey entered into a deferred prosecution agreement with the U.S. Attorney's Office for the Southern District of New York (available below) related to options backdating at the company. This is the second such deferral agreement involving an individual in a white collar crime case that I'm aware of, the other one involving former investment banker Frank Quattrone to settle obstruction of justice charges. While the Department of Justice has entered into these agreements with corporations with increased regularity, they are uncommon for individuals, with both coming from the same office and each involving special circumstances. For Quattrone, the government would have had to try him a third time, after the first proceeding ended with a hung jury and the conviction after the second trial reversed due to improper jury instructions -- and the case would be transferred to a new judge because of a perception of possible bias by the judge in the first two trials.
The reason given for the DPA with McKelvey is that he is suffering from a terminal medical condition, so that it would be unlikely a trial could take place on the charges, and even if there was a conviction it would be unlikely to survive under the abatement doctrine applied in federal cases. The DPA essentially requires McKelvey to obey the law for twelve months and restrict his travel. He acknowledged his involvement in backdating options at Monster Worldwide from 1997 to 2003, and the company's former general counsel earlier entered a guilty plea to charges related to the backdating and was cooperating in the investigation. A U.S. Attorney's Office press release (here) discusses the DPA, and the SEC also entered into a settlement with McKelvey that requires him to disgorge profits of $275,000 but does not impose a civil penalty due to his illness (see SEC Litigation Release here).
The disposition in this case appears to be based on the unique situation of the defendant, and does not seem to signal a trend toward using DPAs to resolve cases involving individuals involved in corporate misconduct. I suspect, however, that defense lawyers may try to push for such dispositions in the future for individual clients in addition to corporations, and it will be interesting to see if these agreements become more common. (ph)