U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20435 / January 23, 2008
Securities and Exchange Commission v. Andrew J. McKelvey, Case No. 08 CV 0555 (S.D.N.Y.)
SEC Settles Charges Against Former CEO of Monster Worldwide, Inc. for Stock Options Backdating
The Securities and Exchange Commission today filed a settled enforcement action against Andrew J. McKelvey, the former Chief Executive Officer of Monster Worldwide, Inc., for his participation in a multi-year scheme to secretly backdate stock options granted to Monster officers, directors and employees.
The Commission's complaint alleges that, beginning in 1997, McKelvey and others backdated stock option grants to coincide with the dates of low closing prices for the Company's common stock, resulting in grants of in-the-money options to numerous individuals. McKelvey understood that backdating options to coincide with low closing prices for Monster stock without recognizing a compensation expense was contrary to accounting rules and contrary to representations in Monster's SEC filings.
McKelvey caused Monster to misrepresent in its periodic filings and proxy statements filed with the Commission that all stock options were granted at the fair market value of the stock on the date of the award, when that was not the case. McKelvey also caused Monster to file materially misstated financial statements with the Commission in its Forms 10-K and 10-Q that did not recognize compensation expense for the company's stock option grants, as required by generally accepted accounting principles. As a result, Monster overstated its aggregate pretax operating income by approximately $339.5 million, for fiscal years 1997 through 2005. Although McKelvey did not receive backdated options, he benefited from the scheme by granting backdated options to four individuals that he personally employed, including three pilots and a mechanic.
Under the settlement, McKelvey will be permanently enjoined from violating Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(b)(5) and 14(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 13a-14, 13b2-1, 13b2-2 and 14a-9, and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13. Additionally, McKelvey will pay $275,989.72 in disgorgement and prejudgment interest, and will be barred from serving as an officer or director of a public company. The settlement does not include a civil penalty due to overriding personal circumstances related to McKelvey. McKelvey agreed to the settlement without admitting or denying the allegations in the complaint.
The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of New York and the United States Postal Inspection Service, which conducted their own separate, parallel investigation.
The Commission's investigation in this matter is continuing.