Monster agrees to $47.5m settlement
Deal ends suit filed by pension fund over backdating
Monster Worldwide Inc. has agreed to pay $47.5 million to the Middlesex County Retirement System and other investors in one of the largest settlements to date in the options backdating scandal sweeping public companies.
The pension fund was the lead plaintiff in a private class-action case brought by Monster investors, who accused the company and its former executives of fraud by backdating stock options to benefit the employees receiving the awards, and failing to disclose the practice.
Monster Worldwide is the parent of the Maynard-based career website www.monster.com. The New York Times Co., the parent company of The Boston Globe, has an alliance with Monster Worldwide Inc. to sell help-wanted advertising.
Monster Worldwide in late 2006 restated its results for nine years for a cumulative charge of approximately $339.5 million related to the options expenses. And four of its former top executives were the target of suits brought by the Securities and Exchange Commission. In addition, its former general counsel, Myron Olesnyckyj, pleaded guilty to federal criminal charges of conspiracy and securities fraud in February 2007. He has not yet been sentenced.
In January, former chief executive Andrew McKelvey settled with the SEC and agreed to pay $275,989.72.
In the Middlesex pension fund suit, McKelvey is required to pay $550,000 after the investors insisted he personally be part of the settlement, said Christopher Keller, a partner at the law firm Labaton Sucharow who represented Middlesex.
"When you do have individuals that pay, for obvious reasons, it has much more of a deterrent effect, where it's not being covered by the company insurance," Keller said.
McKelvey's attorney, Andrew DeVore, declined to comment.
Requiring the former chief executive to "personally pay, to dig into his own pocket" is very rare, said Adam Savett, director of securities class action services at RiskMetrics Group, a New York governance and proxy adviser. "That in and of itself is an exceptional event."
In a statement, Monster chief executive Sal Iannuzzi said the settlement "represents a major step forward in closing this chapter of the company's history."
The Middlesex pension system will split the $47.5 million with other Monster stockholders, based on an as-yet-to-be-drawn formula. Keller said the response from other investors in such cases is typically low, and if this one follows that pattern, Middlesex could wind up gaining more from the settlement than it lost in its investment.
Middlesex bought Monster's stock through the first half of 2006 - a total of 1,500 shares valued at $75,328. A purchase of 300 shares was made just days before a June 2006 article in The Wall Street Journal that reported specific examples of Monster's top executives receiving option awards with low strike prices just before sharp ascents in the stock and concluded the chance of this occurring without backdating were about "one in 9 million."
Keller said Middlesex had a paper loss of about $15,000 on its investment.
Thomas F. Gibson, the chairman of the Middlesex system, said the settlement showed "the value of public pension funds, allowing people to maintain these kinds of actions to correct corporate wrongdoing." Gibson added that individual investors would not likely be able to sustain that kind of action.
The SEC has charged 46 other corporate executives from a total of 22 companies in the wide-ranging options scandal. Of the individuals, 19 have settled. Meanwhile all 15 companies charged by the agency have settled.
This month UnitedHealth Group Inc. agreed to pay the largest settlement to date, $895 million.
The Monster settlement still needs to be approved by US District Judge Jed Rakoff in New York.
Elizabeth Campbell can be reached at ecampbell@globe.com.
