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Ex-Monster exec pleads guilty to backdating

A former top executive of the company that runs the Monster job search Web site admitted in court Thursday that he illegally backdated millions of dollars in employee stock option grants — a practice that cheats shareholders.
Myron Olesnyckyj
Myron Olesnyckyj, former senior vice president of Monster Worldwide Inc. exits Manhattan federal court on Thursday.Louis Lanzano / AP
/ Source: The Associated Press

A former top executive of the company that runs the Monster job search Web site admitted in court Thursday that he illegally backdated millions of dollars in employee stock option grants — a practice that cheats shareholders.

Myron Olesnyckyj, 45, of New Providence, N.J., pleaded to securities fraud and conspiracy to commit securities fraud, charges that carry potential penalties of up to 25 years in prison and fines of more than $5.2 million. He promised to cooperate, which can earn him leniency.

Olesnyckyj, a former Monster senior vice president, agreed to forfeit $381,000, which he said represents the amount he illegally gained. The scheme lasted from 1996 to 2006; he was accused of participating from 1996 to 2003.

Olesnyckyj told U.S. District Judge Laura Taylor Swain that he worked as an attorney at two law firms from 1986 to 1994, when he accepted a position as general counsel for a company that became Monster Worldwide Inc.

Monster went public in 1996. After that, Olesnyckyj said, he and others agreed to backdate annual companywide stock option grants, choosing the dates of the grants after looking at the historical records of the company’s stock price movements. Backdating involves issuing stock options retroactively to coincide with low points in the share price, thus boosting payouts. It can be illegal if it is not properly accounted for and disclosed to investors.

Olesnyckyj said he and others then concealed the backdating from the company’s financial records, which were submitted to the Securities and Exchange Commission, auditors, investors and others.

As a result, the company failed to increase its compensation expenses and reduce its earnings accordingly in its financial records, he said.

“I understood the company’s books and records ... were inaccurate and misleading,” he said.

Federal prosecutors said new hires at Monster were promised they would be granted options at the lowest price within the 30 days following their first day.

Prosecutors said Olesnyckyj concealed this practice from Monster’s auditors, telling an employee in Monster’s Human Resources department by e-mail that “No written document should ever state lowest price over next 30 days! The auditor(s) will view that as backdating options and we’ll have a charge to earning ...”

The government said Olesnyckyj subsequently prepared language to be used in all of Monster’s letters to new hires making no reference to granting options at low prices.

In a statement, U.S. Attorney Michael Garcia said options backdating was not just a benefit for employees who get options. “It does real harm to shareholders who are misled about the earnings of the company.”

“It cheats the shareholders,” agreed Scott Moritz, a former FBI agent who now runs a Manhattan company which investigates white collar crime. “It takes away value from the company and what was to be distributed to the shareholder.”

The SEC on Thursday filed a civil complaint against Olesnyckyj for securities fraud in connection to backdating.

The charges were the first for a Monster executive related to the backdating scandal at the company, which overstated the value of its earnings by more than $250 million between 1997 and 2005.

Monster Worldwide Inc., whose job site competes with newspaper classifieds, is among scores of companies whose stock options backdating practices have been investigated by federal authorities.

The company announced in July 2006 it might need to restate its finances to record additional charges for stock options expenses, and then in September it said it had suspended Olesnyckyj, who also was general counsel and secretary, while it reviewed past stock options grant practices. It dismissed him two months later.

In October, Monster said former Chief Executive Officer Andrew J. McKelvey had resigned from its board after refusing to be interviewed about the company’s past stock options practices. A board committee conducting an internal investigation had sought to interview him further following a meeting in July.

A lawyer for McKelvey said the former executive refused to meet because he did not have sufficient time to review several years worth of facts.

McKelvey became another casualty in the widening scandal over the accounting of past options grants. At least 135 U.S. companies have disclosed internal inquiries or government investigations, and at least 39 executives and board directors at 19 companies have been fired or have resigned.

Monster said in December that it filed restated financial statements to include charges related to the investigation into its stock-option granting.