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Ex-Monster Worldwide Exec Convicted Of Fraud
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(May 15, 2009 - Friday) - http://online.wsj.com/article/BT-CO-20090512-720394.html
By Chad Bray
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A former Monster Worldwide Inc. (MWW) executive was convicted of conspiracy and securities fraud Tuesday in a scheme to improperly backdate millions of dollars in stock-options awards.
A jury of seven women and five men convicted James J. Treacy, Monster's former president and chief operating officer, of two criminal counts in less than a day of deliberations on Tuesday.
A lawyer for Treacy didn't immediately respond to a request for comment.
Prosecutors had alleged Treacy reaped more than $24 million in a scheme in which he; Andrew J. McKelvey, Monster Worldwide's founder and former chief executive; and others "gamed the system" in order to make millions of dollars off stock options from the company.
The options were backdated to low points of the firm's stock, rather than the dates when the options were awarded, Assistant U.S. Attorney Joshua Goldberg said during his opening statement as the case began last month. The trial lasted a little more than three weeks.
It was represented to the public that the company was awarding options on a fair-market basis, rather than awarding options that were already "in the money," Goldberg said at the time.
Prosecutors have claimed that six of eight option awards to Treacy were improperly backdated - covering 450,000 stock options. The government alleged Treacy had at least two opportunities to stop the backdating scheme, but chose not to.
Treacy resigned from the company in 2002, but served on its board through 2003.
Treacy's lawyers had argued that their client wasn't aware of the scheme and he believed the options were being accounted for properly.
"Jim earned the money he got for those options" in helping the company grow from a start-up to a successful company, said Evan Barr, Treacy's lawyer, during his opening statement last month. Treacy only exercised the options after leaving the company, Barr said.
Barr said McKelvey controlled a voting stake of more than 50% in the company and made the decisions about when and to whom to award stock options.
In a 2006 interview with The Wall Street Journal, Treacy, of Glen Rock, N.J., said options grants to top managers were "all in the purview" of the board's compensation committee and McKelvey.
In his opening, Barr said if there was a conspiracy to do something improper, it was between McKelvey and Myron F. Olesnyckyj, Monster's former general counsel.
Monster Worldwide is the parent company of online job-search Web site Monster.com.
"This verdict brings us closer to the end of an unfortunate chapter in the company's history and putting the issue firmly behind us," Monster said in a statement Tuesday. "Our current executive team and board of directors has spent the last two years refocusing Monster on its customers and shareholders, retooling the day-to-day management and overhauling governance so that the company adheres to the highest standards."
In 2006, Monster Worldwide restated its results for 1997 through 2005 by a cumulative pretax amount of $339.5 million, to record additional noncash charges for options-related compensation expense.
McKelvey resigned in October 2006, citing, in part, the demands of coping with a probe of the stock-option practices.
In January 2008, McKelvey entered into a deferred prosecution agreement with federal prosecutors in which he admitted, along with others, to routinely selecting "prices for stock-options grants based on historical dates when Monster's stock price had closed at, or near, a low point, resulting in grants of in-the-money stock options" between 1997 through 2003.
McKelvey died in late November of pancreatic cancer.
Olesnyckyj pleaded guilty in 2007 to criminal charges in connection with the alleged backdating and agreed to cooperate with prosecutors.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com
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