Ex-CEO of KLA-Tencor faces SEC fraud charges
The Securities and Exchange Commission said Wednesday that it charged the former chief executive of KLA-Tencor Corp. with fraud in the backdating of stock options.
The SEC settled lesser charges against the Silicon Valley semiconductor company in the case. Under the accord, KLA didn’t admit or deny the allegations.
In a separate case, U.S. prosecutors charged the former CEO of Brooks Automation Inc. with tax evasion related to option grants, according to documents filed in federal court in Massachusetts.
The SEC said KLA concealed more than $200 million in compensation expenses since 1997 by secretly backdating stock option grants.
Former KLA Chief Executive Kenneth Schroeder repeatedly backdated options between 1999 and 2002, as well as once in 2005 after getting legal advice that doing so without adequate disclosure was improper, the federal agency said.
Shirli Weiss, an attorney for Schroeder, said in a statement that when Schroeder became CEO in 1999 he inherited a process that appeared to him to be working properly.
“The company’s failure to properly account for its option grants is the proper responsibility of those at the company charged with implementing its internal accounting controls,” Weiss said.
San Jose-based KLA issued a statement saying the settlement completely resolved the SEC’s investigation into its past stock option granting practices.
In a statement issued by the SEC, Marc J. Fagel, the agency’s associate regional director in San Francisco, said KLA “went to great lengths to clean house after discovering the fraud, and their cooperation greatly facilitated the government’s investigation.”
More than 180 companies have been investigated by U.S. authorities or have conducted their own internal inquiries into possible manipulation of option grant dates.
Backdating, which can boost the value of options for recipients, is not in itself illegal as long as the practice is properly disclosed and fully accounted for in financial statements.
In the Brooks Automation case, prosecutors alleged that former CEO Robert Therrien filed a false tax return in 1999 when he failed to record income derived from stock options. Therrien resigned last year from the Chelmsford, Mass.-based company, which provides automation services to semiconductor makers.
The SEC also brought civil charges against Therrien, saying he gained more than $10 million from the alleged fraud, according to the complaint.
An attorney for Therrien, Robert Popeo, said he expected his client to be exonerated. The executive “relied upon the advice of tax experts, accountants and attorneys and paid millions of dollars in taxes relating to this transaction,” Popeo said.
