Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Saturday, December 11, 2010

SEC & Vitesse Semiconductor Settle Backdating Charges

The SEC filed civil fraud charges against California-based integrated circuit maker Vitesse Semiconductor Corporation and four former senior executives of Vitesse — co-founder and former Chief Executive Officer Louis Tomasetta, former Chief Financial Officer and Executive Vice President Eugene Hovanec, former Controller and Chief Financial Officer Yatin Mody, and former Manager and Director of Finance Nicole Kaplan. The SEC alleges that Vitesse, through the former senior executives, perpetrated fraudulent and deceptive schemes during 1995 to April 2006 to inflate revenue from shipment of Vitesse's products and to backdate stock options to employees and officers by failing to record millions of dollars of compensation expense. The SEC alleges that all four former executives engaged in the revenue recognition fraud from 2001 to 2006 and that Tomasetta and Hovanec orchestrated the options backdating from 1995 to 2006. The four executives left Vitesse in 2006.

Vitesse has settled the matter by agreeing to be permanently enjoined and to pay a $3 million civil penalty. Mody and Kaplan have each agreed to a bifurcated settlement that provides they will be permanently enjoined and ordered to pay disgorgement, and that any civil penalty will be determined later by the district court. Mody has also agreed to be permanently barred from serving as an officer or director of a public company. The SEC's case against Tomasetta and Hovanec is contested.

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