Mistrial declared again in case against ex-Vitesse execs

NEW YORK Wed Feb 20, 2013 3:00pm EST

NEW YORK Feb 20 (Reuters) - A federal judge declared a mistrial on Wednesday in a criminal case against two former top executives at Vitesse Semiconductor Corp who were accused of inflating company earnings and backdating stock options.

It marked the second time U.S. District Judge Paul Crotty in Manhattan had declared a mistrial in the case against former Chief Executive Officer Louis Tomasetta and former Executive Vice President Eugene Hovanec.

"It's our hope that this will be the end of the case," said Gary Lincenberg, a lawyer for Hovanec.

Lincenberg said the jury sent a note on Tuesday to the judge indicating it had deadlocked 6-6. Crotty asked the jury to continue deliberating, but jurors again said Wednesday they remained deadlocked. The deliberations had begun Friday.

"After seven years of investigation, civil lawsuits settled many years ago, and now a second lengthy criminal trial that ended in a mistrial after another jury deadlocked, it is my hope that the government will now close its case," Dan Marmalefsky, a lawyer for Tomasetta, said in an e-mail.

Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara, declined to comment.

Tomasetta, 64, the co-founder of Vitesse, and Hovanic, 61, were indicted in 2010, more than two years after they were dismissed from the California-based chipmaker.

Prosecutors said that from 2001 to 2006, Tomasetta and Hovanec schemed to deceive Vitesse's investors about the company's financial troubles following the bursting of the tech bubble.

The two men were also accused of backdating stock options issued to Vitesse employees for the three-year period starting in 2001. Illegal backdating occurs when companies tie stock options to a prior date when share prices are low but don't properly account for it.

In the first trial, prosecutors had sought to convict on charges that included securities fraud and false statements to auditors. After the initial mistrial, the judge dismissed the bulk of the case.

A new indictment filed in December 2012 as a result charged Tomasetta and Hovanec with a single count each of conspiracy to commit securities fraud.

Two other executives in the case, former Chief Financial Officer Yatin Mody and former Director of Accounting, Nicole Kaplan, have pleaded guilty to securities fraud and other charges.

The case is USA v. Louis Tomasetta et al, U.S. District Court for the Southern District of New York, 10-1205.

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