NEW YORK, Sept 27 The U.S. Securities and Exchange Commission said on Friday it reached a settlement with two former Vitesse Semiconductor Corp executives accused of inflating company earnings and backdating stock option grants.
The settlements with former Chief Executive Louis Tomasetta and former Executive Vice President Eugene Hovanec followed two mistrials in a related criminal case on similar claims. The two men pleaded guilty to a lesser charge in August.
Under the SEC settlements announced on Friday, Tomasetta will pay $100,000 and Hovanec will pay $50,000 in civil penalties. Both men agreed to be barred from serving as an officer or director of any public company for 10 years.
They have also agreed to orders requiring them to disgorge nearly $2.91 million, although those sums are being deemed by the SEC as satisfied by amounts they previously paid to resolve a separate class action.
Tomasetta and Hovanec neither admitted nor denied the allegations in settling with the SEC. The settlements are subject to the approval of U.S. District Judge Jed Rakoff in Manhattan.
The accord would resolve one of the last remaining cases with roots in a scandal beginning in 2005 over allegations that companies and their executives manipulated stock option dates. A number of civil and criminal cases were launched in the United States as a result.
The SEC in 2010 accused Tomasetta and Hovanec and two other former Vitesse employees of scheming from 2001 to 2006 to inflate Vitesse's revenues.
The SEC also accused Tomasetta and Hovanec of backdating stock option grants from 1995 to 2006 and later attempting a cover-up by fabricating the meeting minutes of a Vitesse board committee.
Illegal backdating occurs when companies tie stock options to an earlier date when share prices are low, but do not properly account for it.
Dan Marmalefsky, a lawyer for Tomasetta, declined to comment, as did Gary Lincenberg, a lawyer for Hovanec.
The SEC case had been on hold while prosecutors in New York sought since 2010 to obtain the conviction of the two men on a broad set of criminal charges including securities fraud and making false statements to auditors.
But after jurors failed to reach a verdict in April 2012, a judge dismissed much of the case. Prosecutors took Tomasetta and Hovanec to trial again on a single count each of conspiracy to commit securities fraud, but jurors again deadlocked in February.
Plea negotiations followed and Tomasetta and Hovanec pleaded guilty in August to an entirely different charge, admitting to altering company records to impede a contemplated investigation by the SEC.
In 2010, Vitesse agreed to pay $3 million to settle with the SEC.
The SEC said on Friday it decided not to impose civil penalties on two other former Vitesse executives, Yatin Mody, a former chief financial officer, and Nicole Kaplan, a former director of accounting.
The SEC cited their cooperation in the investigation. Both pleaded guilty to securities fraud and other charges in 2010.
The case is Securities and Exchange Commission v. Vitesse Semiconductor Corporation, et al, U.S. District Court, Southern District of New York, 10-9239.