Global Sources
EE Times-Asia
Stay in touch with EE Times Asia
EE Times-Asia > Manufacturing/Packaging

SEC sues Integrated Silicon for stock option backdating

Posted: 07 Aug 2007 ?? ?Print Version ?Bookmark and Share

Keywords:stock option? Integrated Silicon Solution? federal law?

The U.S. Securities and Exchange Commission (SEC) has filed charges against Integrated Silicon Solution Inc. (ISSI) and its former chief financial officer, Gary L. Fischer, for allegedly engaging in a long-running fraudulent scheme to backdate stock option grants.

The SEC claims that ISSI and Fischer concealed millions of dollars of stock option compensation expenses by providing executives and employees with potentially lucrative in-the-money options while backdating the grants to avoid reporting the expenses to investors. Both Fischer and ISSI, settled the matter without admitting or denying the commission's charges.

Linda Chatman Thomsen, the SEC's director of enforcement, stated, "This case further highlights the ways in which certain companies have abused option grants. Among other things, ISSI used in-the-money grants to make up for salary cuts, while avoiding the need to report the expenses by improperly backdating the options."

Marc J. Fagel, associate regional director of the SEC's San Francisco Regional Office, added, "As the company's chief financial officer, Fischer was a gatekeeper who had an obligation to accurately account for and disclose the company's stock option expenses. Instead, he caused ISSI to make over 60 backdated grants covering almost 14 million stock options over an eight year period."

The SEC's complaint against ISSI and Fischer, filed in the Northern District of California, alleges that Fischer routinely used hindsight to select option grant dates when ISSI's stock traded at or near monthly or quarterly lows, and at prices below the closing price on the date when Fischer actually selected the grant date. According to the complaint, the dates Fischer selected were then incorporated into Stock Option Committee resolutions and Compensation Committee minutes, even though the committees rarely, if ever, met on the date listed on the minutes and resolutions.

The commission further alleges that Fischer personally benefited from the backdating scheme. Fischer received backdated options which he later exercised to reap undisclosed profits.

Fischer agreed to settle the matter by consenting to a permanent injunction against violations of the antifraud, books and records and other provisions of the federal securities laws; paying $414,830 in disgorgement and interest, and a $125,000 civil penalty; and consenting to an order barring him for five years from acting as an officer or director of a public company.

Meanwhile, ISSI agreed to settle the matter by consenting to a permanent injunction against violations of the antifraud, reporting, internal controls, and books and records provisions of the federal securities laws. In determining to accept ISSI's settlement offer, the SEC considered the cooperation that the semiconductor company provided the commission staff during its investigation.

Article Comments - SEC sues Integrated Silicon for stoc...
*? You can enter [0] more charecters.
*Verify code:


Visit Asia Webinars to learn about the latest in technology and get practical design tips.

Back to Top