Jan. 28, 2008 – KLA-Tencor says it has “agreed in principle” to pay $65M to settle a shareholder lawsuit stemming from its longtime backdating of employee stock options — if approved it would be the second-biggest shareholder payout stemming from the backdating scandal, notes the Associated Press. The Louisiana Municipal Police Employees’ Retirement System was stated as one of the co-lead plaintiffs.

Back in 2006, KLAC was the poster child when much of the US business sector, and particularly tech/Silicon Valley, was swept up in a stock-option backdating scandal — it ultimately led to ~$400M in restatements spanning nearly a decade, condemnation of former CEO Ken Schroeder, and retirement of founder/chairman Ken Levy.

Mercury Interactive holds the dubious top spot for backdating settlements with a whopping $117.5M, which was absorbed by new parent company Hewlett-Packard, the AP notes.

The scandal first unfolded in early 2006 when Merrill Lynch and The Wall Street Journal shed doubt on the timing of stock option distribution at companies listed in the Philadelphia Semiconductor Index. For example, those reports calculated a 1:20 million chance that 10 stock option grants to Levy from 1994-2001 which preceded KLAC stock rallies could have been just coincidence, noted the San Jose Mercury News.