Monster of a Case: New Wave of Corporate Indictments Expected

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February 14, 2007 4:20 PM

The former top lawyer for the Internet job search site Monster.com is expected to enter a guilty plea tomorrow growing out of his role in backdating stock options at the company, federal officials involved in the case tell ABC News.

Officials say Myron Olesnyckyj, the former general counsel of Monster, has agreed to plead guilty to charges of securities fraud in federal court in New York city, as part of a deal to cooperate with prosecutors.

Olesnyckyj is expected to provide testimony about his former boss, Andrew McKelvey, the founder and former CEO of Monster.com, the officials say.

Olesnyckyj's attorneys Lisa Caldwell and Robert Romano told ABC News, "We have no comment," on their client's expected guilty plea.

A spokesman for Monster.com said the company was also cooperating but would not comment further.

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.   

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 back dated.

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.