July 26, 2007 – The US Securities and Exchange Commission has come down hard on former top execs of two semiconductor equipment suppliers for their participation in the wide-ranging practice of stock options backdating in recent years.
In one filing, the SEC has filed civil and criminal charges against Kenneth Schroeder, former CEO of KLA-Tencor Corp., alleging that he “repeatedly engaged in backdating” between his ascension to CEO in 1999 until 2002, and once again in 2005 — even after being told by the company and lawyers that retroactive backdating without disclose was “improper” and put the company at risk of accounting penalties, according to the SEC filing.
The SEC’s complaint against KLA-Tencor itself, though, resulted in essentially a wrist-slap — no civil penalty, fine, or money damages, and a “permanent injunction against future violations” of relevant federal securities laws — though it’s possible the settlement may include unusually stiff penalties for future transgressions. “KLA-Tencor went to great lengths to clean house after discovering the fraud, and their cooperation greatly facilitated the government’s investigation,” noted Marc Fagel, associate regional director of the SEC’s San Francisco regional office, in a statement.
Meanwhile, Robert Therrien, former president/CEO of Brooks Automation, is being charged in a civil fraud action, alleging that he pocketed more than $10 million by fraudulently backdating his stock purchasing options, as part of a broader scheme to grant himself and other Brooks execs and employees with undisclosed “in-the-money” options. Furthermore, the SEC has hit Therrien with a criminal indictment on tax evasion in connection with a Nov. 1999 stock option transaction.
In a separate statement, Brooks noted that was not charged in either the SEC complaint or the indictment, and that it has not been notified of any criminal or civil charges being brought against it by the SEC or US Attorney’s Office.
“All companies must play by the same rules when it comes to accounting for employee compensation and reporting its impact on the company’s bottom line,” stated Linda Chatman Thomsen, director of the SEC’s enforcement division. “Executives who violate these rules for their own personal benefit will be held accountable for their actions.”