Andrew McKelvey, who quit as chief executive of employment website Monster Worldwide Inc. three weeks ago amid a probe of the company’s stock option practices, on Monday also left the firm’s board after refusing to cooperate with a special directors’ committee handling the investigation.
McKelvey, 72, who had taken the post of chairman emeritus after departing as CEO, declined to attend a meeting scheduled for Monday and wouldn’t guarantee to appear later, his lawyer Steven Reich said in a letter filed with the Securities and Exchange Commission.
McKelvey, who founded Monster’s predecessor in 1967, quit as CEO on Oct. 9, saying he didn’t have time to take part in the probe and manage the company.
New York-based Monster is among more than 150 companies that have disclosed internal or federal investigations into whether they inflated the value of option grants by dating them when the stock price was at its lowest in a particular period. The practice, known as backdating, can constitute fraud if it isn’t disclosed to shareholders.
The inquiries have led to the ousters of more than 40 executives and criminal charges against five of them.
At a July meeting with Monster’s special board committee, McKelvey “felt poorly, was jet-lagged and came in without counsel,” leading him to misunderstand questions about whether the company had backdated options, Reich said in the letter to the SEC.
Reich said that McKelvey’s lawyers needed time to investigate option accounting that took place over many years.
Monster stock jumped $1.03 to $41.32 on the news. McKelvey is Monster’s largest single shareholder, and his departure stoked speculation about the sale of his shares, which have 10 times the voting power of regular stock, analysts said.
In other developments related to option investigations:
* Shareholder advisory firm Glass, Lewis & Co. said a study it undertook found hundreds of instances of companies failing to adhere to a 2002 federal law requiring that option grants be publicly disclosed within two days of their grant date.
That may mean that option backdating has continued since 2002, even though securities regulators have said that the disclosure change took away the opportunity for fudging option grant dates, said Todd Fernandez, a research analyst at Glass, Lewis who worked on the study.
“The door is shut as long as there is compliance,” he said.
But in one example cited in the study, Children’s Place Retail Stores Inc. gave 100,000 options to Chief Executive Ezra Dabah on Aug. 13, 2004, but didn’t report the grant until October of that year, Glass, Lewis said. The company’s stock price increased 40% during the two-month period, Glass, Lewis said.
“We do take reporting requirements very seriously, and we do regret that there has been some delays in completing and filing some of our documents with the SEC relating to option grants,” said Heather Anthony, senior director of investor relations for Children’s Place. “We are taking appropriate steps to ensure that all future filings of officers and directors will be completed on time.”
* Intuit Inc. said the SEC had closed its investigation into the software maker’s option accounting practices without taking any punitive action. The SEC began its inquiry in June.
The Justice Department subpoenaed Intuit for information pertaining to its option grants around the same time the SEC began its probe. Intuit said the U.S. attorney’s office hadn’t sought additional information since the company passed along findings of its internal inquiry.
* Linda Chatman Thomsen, the SEC’s enforcement chief, said the agency’s investigators were coming across serious option-related abuses like those alleged at Comverse Technology Inc., one of only two companies whose former executives have been charged criminally by U.S. prosecutors in the scandal.
“We are finding that schemes like the one alleged in Comverse were not so unusual,” Thomsen told reporters after speaking at a conference on option abuses.