Appeals Court Cuts Forfeiture From Ex-Officer at Monster

An appeals court upheld the conviction of James J. Treacy, the former chief operating officer of Monster Worldwide, for improperly accounting for backdated stock options, but it also ruled that the amount he had to forfeit was not correctly calculated.

The United States Court of Appeals in New York on Wednesday also said that United States District Judge Jed Rakoff, who presided over the case in Manhattan, committed a “harmless” error by limiting Mr. Treacy’s lawyer’s cross-examination of a Wall Street Journal reporter. Judge Rakoff restricted the defense’s questioning, citing the journalist’s privilege.
The appeals court said that Judge Rakoff erred in setting Mr. Treacy’s forfeiture and restitution at $6.3 million. The three-judge panel said that Judge Rakoff should recalculate the forfeiture based on a Dec. 9, 1998, option grant, instead of the April 19, 1999, date he used. They agreed with Mr. Treacy that the change would reduce the amount he must forfeit.

Mr. Treacy was sentenced in September 2009 to two years in prison. He is expected to be released in August, according to Federal Bureau of Prisons records.
“We’re studying the opinion and we’re weighing our next step,” Bruce Bishop, a lawyer for Mr. Treacy, said in a telephone interview.
Prosecutors said that Mr. Treacy backdated options at Monster, the world’s largest online recruiting company, by treating them as if they had been granted on dates when Monster’s stock price was at or near a periodic low. None of the grants were recorded as compensation expenses, as the law requires, prosecutors said.

Mr. Treacy earned at least $14.5 million from the plan, including profits from his exercise of backdated options and bonus payments after he reached company financial targets, according to prosecutors.

Monster reported in 2001 that net income was $69 million when it was really $3.4 million after options expenses, prosecutors said. The company said in December 2006 that it had overstated earnings by $271.9 million in the previous nine years because of improperly recorded option grants.