Reuters: Technology News: Ex-Vitesse execs plead guilty in backdating-related case

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Ex-Vitesse execs plead guilty in backdating-related case Aug 15th 2013, 19:14 By Nate Raymond NEW YORK | Thu Aug 15, 2013 3:14pm EDT NEW YORK (Reuters) - Two former Vitesse Semiconductor Corp (VTSS.O) executives who jurors twice failed to convict for inflating company earnings and backdating stock options pleaded guilty to a lesser charge Thursday. Former Chief Executive Louis Tomasetta and former Executive Vice President Eugene Hovanec admitted to altering company records to impede a contemplated investigation by the U.S. Securities and Exchange Commission. The case stems from a 2005 scandal over allegations companies and their executives manipulated stock option dates. The scandal resulted in a wave of civil and criminal cases by U.S. enforcement agencies. Jurors failed to reach verdicts twice before in the case, a fact that appears to have influenced Thursday's plea deal. Citing the "unique factual circumstances of this case," prosecutors agreed to recommend probation for the two former executives in exchange for their plea. Tomasetta, 64, and Hovanec, 61, were originally indicted in 2010 on a broad set of charges that included securities fraud and making false statements to auditors. The original indictment alleged that from 2001 to 2006, Tomasetta and Hovanec schemed to mislead Vitesse's investors about the Camarillo, California-based chipmaker's financial conditions and business results. The indictment also alleged that Tomasetta, a Vitesse co-founder, and Hovanec illegally backdated stock options issued to employees over a 3-year period starting in 2001. But after jurors failed to reach a verdict in April 2012, U.S. District Judge Paul Crotty dismissed much of the case. A new indictment unveiled in December 2012 subsequently charged Tomasetta and Hovanec with a single count each of conspiracy to commit securities fraud. The case went to trial again, only to end with jurors again deadlocked. According to the new charging documents, Tomasetta, Hovanec and a third executive, Yatin Mody, in April 2006 altered minutes of a 2001 meeting of Vitesse's compensation committee. They took action amid an internal investigation that came in response to a Wall Street Journal report, which had raised questions about stock option practices at companies including Vitesse. The two men face a maximum 5-year sentence on the one count they pleaded guilty to. A November 4 trial date in the case will now serve instead as the expected sentencing date. Mody, a former chief financial officer, and Nicole Kaplan, a former director of accounting, pleaded guilty to securities fraud and other charges in 2010. Vitesse, which was not charged in the criminal case, agreed in 2010 to pay $3 million to settle with the SEC. The company and insurers for Tomasetta and Hovanec also earlier agreed in 2007 to pay $10.2 million to settle various shareholder lawsuits over backdating and accounting manipulation allegations. The case is U.S. v. Tomasetta et al, U.S. District Court, Southern District of New York, 10-cr-1205. (Reporting by Nate Raymond in New York; Editing by Richard Chang) Link this Share this Digg this Email Reprints

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