Vitesse finds more financial misconduct
Vitesse Semiconductor Corp., already under investigation for improper accounting of stock options, said Tuesday that an internal review revealed that former executives manipulated other financial information in addition to the timing of option grants.
The Camarillo chip maker, one of the highflying tech companies in the 1990s, said an internal review by two independent directors found evidence of false sales invoices and improper accounts related to revenue recognition and inventory dating from 1995.
“They take the cake for bad management,” said Michael D. Cohen, research director at Pacific American Securities in San Diego. “They were once a great company, but now it looks like they weren’t so great after all.”
Vitesse also fired its independent auditors, KPMG, for what it said was the accounting firm’s “lack of independence.” The company is looking for new auditors.
KPMG spokesman George Ledwith said the firm wasn’t aware of any independence issue, “nor has the company communicated any basis for this statement to us.”
In May, Vitesse fired Chief Executive Louis R. Tomasetta, Chief Financial Officer Yatin Mody and Executive Vice President Eugene F. Hovanec.
Vitesse’s stock was delisted from Nasdaq in June because the company was unable to file its quarterly report on time. Vitesse has said it would try to regain its listing, though it also said it might never be able to provide audited, restated financial reports for its 2004 and 2005 fiscal years.
The company could not say when it will file its annual financial report with the Securities and Exchange Commission for the year ended Sept. 30.
The company would not comment beyond a news release disclosing the results of the review.
Vitesse is one of more than 100 public corporations being investigated by the SEC for issuing stock options to executives and selecting earlier grant dates to take advantage of lower exercise prices.
“Such backdating and manipulation resulted in lower exercise prices for the stock options,” Vitesse said in its release.
That led to bigger pay days for executives cashing stock options, but hid the true costs of the options.
The company said no current executives or directors were involved in the backdating or other financial improprieties. The committee didn’t find any evidence that current managers knew of the improper practices.
Reuters was used in compiling this report.
