Marvell to settle SEC options suit

Semiconductor maker Marvell Technology Group on Thursday agreed to pay a $10-million civil fine to settle regulators’ allegations of improper backdating of stock options.

The Santa Clara, Calif., company did not admit or deny wrongdoing in settling with the Securities and Exchange Commission. The agency sued Marvell, alleging that it failed to disclose the employee stock-option awards as expenses and backdated the options to dates with lower stock prices.

The backdating scheme allowed the company to overstate profit by $362 million for fiscal years 2000 through 2006, the SEC lawsuit alleged.

In addition, Marvell co-founder and former Chief Operating Officer Weili Dai, accused of falsifying minutes of phantom meetings, agreed to pay a $500,000 civil fine and to be barred for five years from serving as an executive or director of any public company. She also neither admitted nor denied the SEC’s allegations.

Backdating options make the rewards even more lucrative by retroactively setting the exercise price to a low point in the stock’s value. Usually, a stock option’s exercise price coincides with the market value at the time of a grant to give the recipient an incentive to drive the price higher.

If companies backdate options without properly disclosing and accounting for the move, it can cause profits to be overstated and taxes to be underpaid.