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Former Monster Exec Charged with Backdating Stock Options

By Grant Gross

April 30, 2008 — IDG News Service —

James Treacy, former chief operating officer and president of online job board Monster Worldwide, has been charged with securities fraud and conspiracy in connection with the backdating of millions of dollars worth of employee stock options, the U.S. Attorney's Office for the Southern District of New York announced Wednesday.

Treacy, 50, is accused of conspiring with other former senior executives at Monster to systematically backdate stock option grants to employees between 1997 and 2003, according to a news release from U.S. Attorney Michael Garcia and the New York Division of the U.S. Postal Inspection Service.

The executives made an effort to provide profitable options to employees without recording the required compensation expenses, resulting in a false inflation of Monster's earnings, the U.S. Attorney's Office said. Between 1997 and 2005, Monster executives understated compensation expenses by about US$339 million, the office said.

Treacy received more than 1 million options while employed at Monster, the U.S. Attorney's Office said. Treacy has exercised about 745,000 options, resulting in income of more than $23 million, with about $13.5 million coming from the backdating scheme, the office said.

Treacy faces one substantive count of securities fraud and one count of conspiracy to commit securities fraud, making false statements in SEC filings, making false statements to auditors and falsifying corporate books and records. If convicted, he could face 20 years in prison for the securities fraud charge and five years for the conspiracy charge, in addition to fines.

Monster, in mid-2006, announced that it was restating earnings for 2005 and early 2006 and was initiating an internal investigation into backdating at the company. Dozens of tech companies have faced backdating investigations since mid-2006.

In March 2007, the company's former general counsel, Myron Olesnyckyj, pleaded guilty to conspiracy and securities fraud. Former CEO Andrew McKelvey pleaded guilty in January to charges related to the backdating.

The U.S. Securities and Exchange Commission announced a civil settlement with McKelvey in January. The settlement required McKelvey to pay more than $275,000.

The SEC on Wednesday announced it had filed a complaint in U.S. District Court for the Southern District of New York against Treacy and former Monster controller Anthony Bonica related to the alleged backdating.

 

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