Former Monster CEO settles case
EmptyNEW YORK -- Andrew McKelvey, the founder and former chief executive of Monster Worldwide Inc., will relinquish much of his voting stake in the online job-listings company and pay back more than $8 million as part of a settlement into claims that he improperly backdated stock options to employees.
Monster announced its settlement with McKelvey on Wednesday, the same day he settled separate charges over the options-backdating scheme with the Securities and Exchange Commission and federal prosecutors. The SEC settlement calls for him to pay a separate penalty of $276,000 and bars him from serving as a director or officer of a public company.
McKelvey departed Monster in 2006 amid questions about his role in the options backdating scandal. The company has also fired its former general counsel, Myron Olesnyckyj, who was largely responsible for administering the company's stock options plan and later pled guilty to charges of securities fraud.
The U.S. Attorney's office for the Southern District of New York said in a statement that it reached the settlement with McKelvey, who is 73 years old, in light of the fact that he had a terminal medical condition.
Prosecutors didn't specify what the condition was and a Monster spokeswoman didn't return phone or e-mail messages seeking comment, but The Wall Street Journal reported that McKelvey has pancreatic cancer and that his prognosis is poor.
Under Monster's settlement with McKelvey, he will pay the company $8 million and also convert the 4.76 million shares of supervoting stock he controls into ordinary shares, reducing his voting power in the company from 31% to 7.4%.
The SEC, in its settlement filed in federal court in New York, accused McKelvey and others of putting earlier dates on the grants of stock options in order to make them coincide with lower closing prices for the company's stock. That action rendered them more valuable to the people who received them and could then sell them at a higher price.
Options are usually granted at the price of a company's stock on a particular day, and the SEC said that's what Monster had reported about the options in question.
The SEC said in its settlement that McKelvey understood that the backdating of the options without recognizing an appropriate compensation expense went against accounting rules and also wasn't properly disclosed in Monster's regulatory filings.
While McKelvey himself didn't receive backdated options, the SEC said he benefited from the scheme by giving the options to four people that he employed personally, including three pilots and a mechanic.
The SEC said that the misstatements resulted in Monster overstating its pretax earnings by $339.5 million in the fiscal years 1997 through 2005.
McKelvey agreed to the SEC settlement without confirming or denying the agency's accusations against him.
Monster has been plagued with other senior management turnover since McKelvey's departure. On Tuesday Monster disclosed in a regulatory filing that Steven Pogorzelski had resigned as executive vice president of global sales and customer development.
Goldman Sachs analyst Peter Appert said in a note to clients Wednesday that Pogorzelski was a "key driver" of the company's successful expansion overseas, and that his departure was a "notable loss for the company."
Monster's CEO Sal Iannuzzi said in a statement that the settlement with McKelvey marked "another step forward" in the company's efforts to put the litigation over stock options behind it, which have been "an ongoing distraction to our customers, employees and investors."