Monster of a Case: New Wave of Corporate Indictments Expected

The former top lawyer for the Internet job search company Monster Worldwide, Inc., pled guilty Thursday to criminal charges that stemmed from backdating stock options, as first reported by "The Blotter" on ABCNews.com Wednesday. Myron Olesnyckyj pled guilty to conspiracy charges that included his violating of SEC regulations.  In another court action, a 27-page SEC civil complaint charged Olesnyckyj with backdating stock options, destroying records in an effort to conceal the backdating and personally benefiting from the backdating. Read the SEC complaint against Myron Olesnyckyj.
As general counsel for the 4,600-employee public company, Olesnyckyj had a role in preparing various SEC filings for the company, including quarterly and annual reports. The SEC complaint alleges that from 1997 to 2005 the company "materially understated" compensation expenses and, as a result, overstated profits. In December, Monster said it had overstated profit from 1997 to 2005 by $271.9 million, and the exercise price of a significant number of stock option grants from 1997 through March 2003 was different from the fair market value of the underlying shares on the grant date. Olesnyckyj pled guilty Thursday to one count of conspiracy to commit securities fraud, to make false statements in SEC filings, to make false statements to auditors and to falsify corporate books and records; and one substantive count of securities fraud, the Justice Department said in a statement concerning the criminal charges. The charges carry a total maximum penalty of 25 years in prison. Read the United States’ case against Olesnyckyj.
Olesnyckyj’s attorneys Lisa Caldwell and Robert Romano told ABC News on Wednesday, "We have no comment," on the allegations or their client’s then-expected guilty plea. They were not immediately available to add to their comments on Thursday. A spokesperson for Monster.com said, "The company terminated this individual some time ago, and it is inappropriate to comment on the developments. The company will continue to cooperate with the government in this ongoing investigation." Click Here for Full Blotter Coverage. "Corporate executives who deliberately skew their books to hide compensation expenses are engaged in fraud against shareholders and investors," said Paul McNulty, the Deputy Attorney General of the United States. The plea deal comes as dozens of former CEOs and other corporate officials face possible indictment as the Department of Justice presses its investigation of the backdating of billions of dollars of stock options. The FBI, IRS and U.S. Postal Inspectors are working on at least 60 active criminal investigations, and federal officials tell ABC News at least a half dozen are now in the final phases of investigation. "This is a major initiative of the President’s Corporate Fraud Task Force," said Justice Department spokesman Brian Sierra. Dozens of CEOs and other top officials have already resigned over the practice of "stealth compensation," in which executive pay packages have been enhanced by granting executives the right to buy stock at favorably low "strike prices" set by acting as if the options were granted earlier than they were, resulting in a larger potential profit.  Prosecutors say the failure to disclose the backdating can constitute securities fraud. More than 140 companies are under investigation by the Securities and Exchange Commission, and federal prosecutors are known to be considering criminal indictments in a number of the SEC cases.    See who’s been in the hot seat on stock option questions. The chairman of Apple Computer, Steve Jobs, has also been questioned by federal investigators in San Francisco about the backdating of stock options at the company. Apple says an internal investigation by its board cleared Jobs and all members of the company’s current management of any wrongdoing and says there has been no indication that Jobs is considered a target of any criminal investigation. "We’ve given all this information to the SEC," Jobs told ABC News last month. "And I think things are gonna be just fine," he said. Jobs’ role in granting stock options at a second company, Pixar, is also under investigation, according to published reports. "The Wall Street Journal" reported last week that prosecutors are investigating stock options granted in 2001 by the animated film company Pixar, Inc., to its top film director, John Lasseter, as part of a new 10-year contract. According to the paper, Lasseter, the director of "Toy Story," received one million stock options at the lowest share price of the year, a date that was three months before his new contract was signed. The backdating resulted in a potential gain for Lasseter of $6.4 million, the paper said. Pixar was bought last year by Walt Disney Co., the parent company of ABC. Disney officials say the value of Lasseter’s options was fully disclosed, although not the fact that they were backdated. Disney says its board began an independent review of the transaction last November, but Disney CEO Robert Iger says the issue will not likely have any effect on Disney. "We aren’t aware of any basis under which stock options issued by Pixar would have a material impact on our financial statement," Iger said in a statement. Jobs is Disney’s single largest shareholder. "The Wall Street Journal" reported that prosecutors are awaiting the outcome of the Disney board’s review before making any decisions on the case. Two criminal case are already in the federal court system. One involves Comverse Technology of New York, where one executive fled the country and another has entered a guilty plea. The chief financial officer of Comverse, David Kreinberg, entered a plea in October to charges of securities fraud. He now faces up to 15 years in prison. His former boss, Comverse CEO Kobi Alexander, fled to the African country of Namibia, where he is currently fighting U.S. extradition efforts.