Opinion ID: 206316
Heading Depth: 3
Heading Rank: 2

Heading: The December 9, 1998, Grant

Text: The Government's chart determined that the measurement date, April 19, 1999, was appropriate for the as of December 9, 1998, grant, and the district court appears to have adopted this date as well. The Government argues that because Treacy received his 75,000 options as part of a broad-based grant of 862,000 options to multiple recipients and not as a one-off grant to him alone, the APB two-prong standard was not satisfied until all the recipients were allocated. Recipient allocations remained uncertain until at least the end of March 1999. The Government also points to the e-mails dated April 12, 1999, in which Treacy and Olesnyckyj discussed the number of options to authorize under Monster's then-new stock option plan, pursuant to which the options backdated to December 9, 1998, would be issued. See supra, p. 41-42. On or about April 19, 1999, as evidenced by the modify date of a computer document, Olesnyckyj created a UWC for the broad-based grant with the grant date of December 9, 1998. On this basis, the Government contends that the district court properly found the measurement date of the grant was April 19, 1999, because it was the earliest date upon which the Compensation Committee could have approved the grant with the specified recipients and number of options. In contrast, Treacy argues that the first prong of the APB standard was met on September 11, 1998, as evidenced by a September 15, 1998, memo to Olesnyckyj in which Treacy stated, [McKelvey] met with me on Friday, September 11, 1998[,] to advise me that [i]n December 1998 at annual option grant time, I will receive 75,000 TMPW share options. According to Treacy, the second prong of the APB standardthe price of the grantwas determined on, or shortly after, January 15, 1999. At the very latest, Treacy contends that on February 9, 1999, he submitted an SEC Form 5 disclosing the quantity and the price of the December 9, 1998, option grant to himthereby meeting the APB standard. We cannot give any weight to Treacy's September 15, 1998, memo because of concerns about fraud. As we have previously stated, moreover, the measurement date cannot have been set by McKelvey unilaterally. But Treacy's second argument is persuasive. The evidence indicates that Monster issued different rounds of stock option grants with as of dates of December 9, 1998. For example, the record shows that on February 26, 1999, Monster sent a letter to over 50 employees that they would receive a stock option grant at the strike price of $26.875the price of the December 9, 1998, as of date stock option grant. Subsequent emails in April 1999 between Treacy and Olesnyckyj discussed a new plan of stock option grants with the same backdated as of December 9, 1998, date and strike price of $26.875 per share. This new plan increased the stock options by $15 million. As noted, the evidence shows that Treacy submitted an SEC Form 5 dated February 9, 1999, disclosing the quantity of stock options and price of the December 9, 1998, option grant. Although there were later rounds of stock option grants that used the as of December 9, 1998, date, this does not change the fact that Treacy's grant was set earlier. There is nothing in the APB standard that suggests that every recipient of the options grant with the same backdated as of date must be determined to establish the measurement date. On the contrary, the first prong is met when the number of shares that an individual employee is entitled to receive is determined. APB Opinion 25, ¶ 10.b (emphasis added). Thus, Treacy's SEC Form 5 disclosing both quantity and price of the December 9, 1998, option grant is evidence that both prongs of the APB Opinion 25 were set as of February 9, 1999, and it was error to calculate the forfeiture based on a measurement date of April 19, 1999. If the February 9 date were used as the measurement date, the difference in strike price and measurement date price would be smaller, by Treacy's calculations, resulting in a smaller forfeiture. We therefore vacate this portion of the order of forfeiture and remand for recalculation of the appropriate forfeiture based on the December 9, 1998, option grant.