Ex-Vitesse Executives Settle With SEC Claims Over Revenue
Two former top executives at Vitesse Semiconductor Corp. (VTSS), a maker of integrated circuits, settled Securities and Exchange Commission claims they backdated stock options and falsely inflated sales.
Former Chief Executive Officer Louis R. Tomasetta agreed to pay a $100,000 fine, while ex-Chief Financial Officer Eugene F. Hovanecpays $50,000, the SEC said in a statement today. While the pair also agreed to forfeit a total of $2.9 million in proceeds from the options, those sanctions were deemed satisfied by their payments in a class-action lawsuit, the agency said.
Tomasetta, Hovanec and two other employees “engaged in an elaborate channel-stuffing scheme” from September 2001 to April 2006 to inflate the Camarillo, California-based company’s revenue as reported in its financial statements, the SEC said in a Dec. 10, 2010 statement. They were also accused of backdating stock-option grants and failing to “record millions of dollars in compensation expenses,” associated with them.
Tomasetta and Hovanec each pleaded guilty Aug. 15 to a single count of conspiracy to falsify company records in an effort to impede an SEC inquiry. The pleas followed two mistrials on charges that they conspired to inflate earnings.
The SEC said Tomasetta and Hovanec “attempted to cover up their options backdating scheme by fabricating fraudulent meeting minutes” for the board’s compensation committee. They didn’t admit or deny the agency’s claims. Both were barred from serving as an officer or director of a public company for 10 years.
The agency chose not to seek civil penalties against two other Vitesse employees -- former controller and CFO Yatin D. Mody and former Director of Finance Nicole R. Kaplan -- based on their cooperation, according to today’s statement. They previously agreed to disgorge a total of more than $209,000 in proceeds and interest, the agency said.
Dan E. Marmalefsky, an attorney for Tomasetta, and Gary S. Lincenberg, who represented Hovanec, declined to comment. A company spokesman didn’t respond to messages seeking comment.
Vitesse fired Tomasetta and Hovanec in May 2006 during an outside investigation of the company’s option grants. The company agreed in 2007 to pay $8.75 million to settle shareholder suits related to the alleged accounting fraud and in 2010 settled claims by the SEC for $3 million.