Ex-Monster CEO to avoid prison time in options case

Andrew McKelvey is seen in this undated file photo. The former chief of online job search site Monster Worldwide Inc, suffering from a terminal illness, will avoid prison as part of an agreement on Wednesday with U.S. prosecutors probing stock options backdating.

NEW YORK (Reuters) - The former chief of online job search site Monster Worldwide Inc (MNST.O), suffering from a terminal illness, will avoid prison as part of an agreement on Wednesday with U.S. prosecutors probing stock options backdating.

Andrew McKelvey, 73, was criminally charged with securities fraud and conspiracy for his role in manipulating stock options and he admitted playing a role in the scheme. However, the government said it had agreed to defer prosecuting him because of his poor health.

The case will be dropped after 12 months if McKelvey, who resigned as chairman and chief executive of Monster in October 2006, abides by the terms of the pact, prosecutors said.

McKelvey said in a statement that he and others "routinely selected prices for stock options grants based on historical dates when Monster's stock price had closed at, or near, a low point." The scheme led the company to understate compensation expenses, and inflate its earnings, by more than $300 million between 1997 and 2005, prosecutors said.

"I signed and certified public filings with the SEC that reported false and misleading financial results and contained misleading descriptions of Monster's options granting process," McKelvey said in a statement accompanying the agreement.

Separately, the U.S. Securities and Exchange Commission said McKelvey agreed to pay $275,989 to settle civil charges. He agreed to the settlement without admitting or denying allegations, the SEC said.

He also reached a settlement with his former company to resolve options-related claims, agreeing to pay $8 million and convert 4.76 million shares of Class B common stock he owns for a like number of ordinary shares, Monster said.

The change will reduce McKelvey's voting power from about 31.01 percent to 7.38 percent, the company said.

"Today's settlements avoid the need for lengthy court proceedings and provide certainty and closure," his lawyer, Steven Reich, said in a statement.

At a hearing in Manhattan federal court, U.S. Magistrate Judge Gabriel Gorenstein approved the agreement, allowing a frail-looking McKelvey to sit during the proceedings.

McKelvey's attorney declined to provide details on McKelvey's illness. The U.S. Attorney's Office in Manhattan said the former executive had a terminal medical condition.

The U.S. attorney's office had investigated the criminal case along with the U.S. Postal Inspection Service.

McKelvey, who founded the employment Web site, stepped down after refusing to be interviewed as part of an internal investigation into the company's options award practices.

In February 2007, Myron Olesnyckyj, a former general counsel at the company, pleaded guilty to criminal charges related to backdating options and is awaiting sentencing.

In November, a federal judge allowed a shareholder lawsuit to go forward against McKelvey that contends he played a key role in backdating stock options handed out to employees.

(Reporting by Paritosh Bansal and Martha Graybow, editing by Derek Caney/Tim Dobbyn)