May 18 (Bloomberg) -- Monster Worldwide Inc., the world’s largest online recruiting company, will pay $2.5 million to resolve Securities and Exchange Commission accusations that it misled the public about its stock options.

A lawsuit and settlement papers were filed today in federal court in New York. A federal jury last week found former Monster Chief Operating Officer James Treacy, 51, guilty in a criminal trial of defrauding investors by improperly accounting for backdated stock options at the company.

“Monster’s periodic filings and proxy statements falsely portrayed Monster’s stock options as having been granted at exercise prices equal to the fair market value of Monster’s common stock on the date of the grant, when, in fact, Monster was granting in-the-money options,” the SEC said in its civil complaint.

The New York-based company reported in 2001 that net income was $69 million when it was really $3.4 million after options expenses were recorded, prosecutors said in the Treacy case. The company said in December 2006 that it overstated earnings by $271.9 million in the previous nine years because of improperly recorded option grants. Prosecutors said the company understated compensation by $339 million.

“This is an important step in closing an unfortunate chapter in the company’s history,” company Chief Executive Officer Sal Iannuzzi said in a statement. “Our current executive team has spent the last two years refocusing Monster on its customers and shareholders.”

Investor Lawsuit

Monster last year agreed to pay $47.5 million to resolve an investor lawsuit over its options accounting. The agreement represented a recovery of 28 percent of potential damages allegedly suffered by investors, a lawyer said at the time.

In backdating, companies retroactively change grant dates to increase a recipient’s gains. At least 225 companies have disclosed internal or federal probes involving options irregularities, and more than 140 have said they would restate financial results.

It is not a crime to backdate option grants. It is a crime not to disclose backdated grants.

The company today neither admitted nor denied liability while agreeing not to violate certain securities laws, the SEC and Monster said in statements. Monster said the $2.5 million fine is “within the amount previously accrued” by the company.

Monster rose 56 cents to $13.12 at 1:28 p.m. in New York Stock Exchange composite trading. The shares have gained 8.9 percent this year.

The Treacy criminal case is U.S. v. Treacy, 1:08-cr-00366, and the lawsuit is SEC v. Monster, 09-cv-04641, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net.

Last Updated: May 18, 2009 13:56 EDT