Monster Options Investigation Widens [WSJ]
By JAMES BANDLER
January 18, 2007; Page A4
Federal prosecutors are intensifying their criminal probe into stock-option manipulation at Monster Worldwide Inc., prompted in part by emails written by the company's former general counsel that suggest he knew the accounting implications of backdated options, say people familiar with the probe.
The emails were written by Myron Olesnyckyj, the former general counsel who was suspended and then fired by Monster last year.
The company, the parent of the popular Monster.com job-search Web site, last month admitted to "intentional" backdating of stock options over a six-year period by former officials, without naming anybody. Monster's founder, Andrew McKelvey, stepped down from his chief executive post last fall, and soon after resigned from the board after declining to be reinterviewed by lawyers conducting an internal probe of the options matter. Monster Worldwide lowered nine years of net income by $272 million to account for extra compensation costs associated with improperly dated options.
The probe into options abuses at Monster is being handled by the U.S. Attorney for the Southern District of New York., considered among the most experienced in the country in prosecuting white-collar securities cases. At least two assistant U.S. attorneys have been assigned to the Monster case.
An attorney for Mr. Olesnyckyj declined to comment.
People familiar with the case say prosecutors may be seeking to focus on Mr. Olesnyckyj, or may try to win his cooperation in investigating more senior officials. Prosecutors have sought to interview several former and current Monster employees.
Monster is one of nearly 140 companies under federal investigation for possible stock options manipulations. Options let recipients buy company shares some time in the future, usually at the price on the day they are granted. That means that recipients can benefit if share prices rise. Backdating involves pretending that the grant date was earlier than it actually was, so that the recipient can later buy for a lower price, thus enhancing potential profit.
Mr. McKelvey founded a predecessor of Monster 40 years ago as a Yellow Pages advertising company. In recent years it has become a major force in online employment advertising. Based in Manhattan, it has about $1 billion in annual revenue.
Monster has said its backdating troubles affected a "substantial number" of grants between 1997 and 2003. The company selected favorable grant dates for new hires, for salesman-of-the-year awards, and for senior executives, say people familiar with the situation.
Under accounting rules in place at the time, a company was supposed to take a charge against its earnings for any options issued with an exercise price lower than the level at which the stock was trading on the day of the grant.
In emails with senior finance and human resources officials, Mr. Olesnyckyj indicated his understanding of the accounting rules and how grants should be properly handled, according to a person familiar with the matter. Separately, another email involving high level officials discussed "the finessing" of outside auditors, according to people who have seen the email.
Prosecutors also are looking at other matters involving Mr. McKelvey, including the granting of stock options to several of his personal employees, including three pilots and a mechanic for his airplane, according to one person close to the situation. Personal employees and Mr. McKelvey's adult relatives also had health-care benefits paid for by Monster, this person said. The amount totaled $362,000 from 1997 to 2006, the company has said. Mr. McKelvey recently repaid that sum, with interest.
Mr. McKelvey's attorney, Steven F. Reich, declined to comment. Mr. McKelvey didn't get stock options from Monster.
A spokeswoman for the U.S. Attorney in Manhattan Michael J. Garcia said the office could neither confirm nor deny the existence of an investigation.
--Paul Davies contributed to this article.
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