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
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
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
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
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
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.