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Monster Settles Stock Backdating Case for $2.5 million

by
John Zappe
May 18, 2009, 3:49 pm ET

Just days after its former Chief Operating Officer was convicted of stock fraud, Monster Worldwide has agreed to pay $2.5 million to settle charges brought against the company by the Securities and Exchange Commission.

The SEC accused the company this morning of filing false statements about the granting of millions of stock options and failing to properly account for their issuance. In the complaint filed in the District Court for Southern District of New York, the SEC alleges “Monster filed false and materially misleading statements concerning the true grant date and exercise price of stock options in its annual, quarterly and current reports, proxy statements and registration statements.”

The complaint was accompanied by a notice of the proposed settlement, which, in addition to the penalty, says Monster must also “consent to the entry of an order permanently enjoining it from violating the antifraud, reporting, recordkeeping and internal controls provisions of the federal securities laws.”

The SEC and the U.S. Attorney’s Office have been investigating Monster and its backdating of stock options granted to senior executives and others in order to make them more valuable. Last week, former Monster COO James Treacy was convicted by a federal jury in New York City of one count of securities fraud, and one count of conspiracy to commit securities fraud, file false statements with the SEC, make false statements to auditors, and falsify books and records. He faces up to 25 years on the conviction.

In settling the case Monster is neither admitting nor denying wrongdoing. However, in the press release issued by the SEC, New York Acting Regional Director unambiguously said, “Monster misled investors by failing to report hundreds of millions of dollars of expenses. Backdating stock options made the company look like it had more money than it really did.”

The SEC said it took into account that Monster cooperated with investigators and that the company’s management has changed since the investigation began in 2006.

Four of Monster’s former executives were accused in connection with the backdating investigation. They are the late CEO Andrew McKelvey, General Counsel Myron Olesnyckyj, Controller Anthony Bonica, and Treacy. McKelvey, terminally ill with cancer at the time the charges were filed, was allowed a special deal in which he admitted his guilty, but not prosecuted. Olesnyskyj became a government witness in the case and pleaded guilty to a single charge. The SEC case against Bonica has not been resolved.

Monster’s brief statement on the settlement includes a comment from CEO Sal Iannuzzi who says: “This is an important step in closing an unfortunate chapter in the company’s history and putting the issue firmly behind us. Our current executive team has spent the last two years refocusing Monster on its customers and shareholders, retooling the day-to-day management, and overhauling governance in an effort to adhere to the highest standards.”

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

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