More IT firms run afoul of stock options laws
The practice of manipulating stock options grants to make them more favorable has come back to haunt yet another round of high-tech executives. A former Monster Worldwide executive pleaded guilty in New York Thursday, just a day after the founder of Take-Two Interactive Software pleaded guilty to a state felony related to backdating.
Myron Olesnyckyj, Monster’s former general counsel, faced charges of securities fraud and conspiracy in connection with the backdating of millions of dollars’ worth of employee stock option grants at the online recruitment services company. Olesnyckyj appeared before U.S. District Judge Laura Taylor Swain.
According to a statement from the U.S. Attorney’s office in New York, Olesnyckyj “conspired with other former senior executives at Monster to systematically backdate stock option grants to Monster employees in an effort to fraudulently suppress Monster’s compensation expenses, and falsely inflate its earnings and share price. As a result, Monster’s public filings with the Securities and Exchange Commission between 1997 and 2005 fraudulently understated the company’s compensation expenses, and inflated its earnings by over 300 million dollars.”
Names of Olesnyckyj’s alleged co-conspirators were not immediately disclosed.
Olesnyckyj’s plea follows the U.S. Securities and Exchange Commission’s Wednesday announcement that it simultaneously filed and settled civil charges against Ryan Brant, the former CEO and chairman of Take-Two, a video and computer game publisher and distributor, which he founded.
The SEC alleged that during a seven-year period, Brant enriched himself and others by granting undisclosed, “in the money” stock options to himself and to other Take-Two officers and employees. Brant did not admit or deny the allegations, the SEC said, but agreed to a settlement that bars him from serving as the officer or director of a public company. He also agreed to pay about $6.3 million, comprised of what the SEC called “ill-gotten gains” of more than $4 million plus $1 million interest, plus a $1 million civil penalty. The settlement must still be approved in court.
A Take-Two representative said only that Brant is no longer an employee, and it would not be appropriate to comment on his actions as a private individual.
Meanwhile, middleware vendor BEA Systems Wednesday announced the conclusion of its stock-option review. The review won’t cost any high-level executives their jobs, but will cost a number of them money. Several former and current executives and directors have agreed to repay the company after-tax profits they realized on mispriced options.
Stock-option backdating is a practice in which the date of an option’s stock price is changed, usually in an effort to boost employee compensation. The practice is legal, provided that companies properly disclose when it’s done to shareholders and regulators. A number of high-tech companies find themselves the focus of stock-option probes, including Apple and Pixar.
Macworld.com editors contributed to this report.