Vitesse to pay $8.75 million to settle stock option lawsuit

Vitesse Semiconductor Corp., a maker of chips for telecommunications networks, will pay $8.75 million to settle shareholder lawsuits over the backdating of employee stock options.

The company’s insurers will cover the amount, and former Chief Executive Louis Tomasetta and former Executive Vice President Eugene Hovanec will pay $1.45 million into a settlement fund for shareholders, Vitesse said in a statement.

Tomasetta, Hovanec and former Vitesse finance chief Yatin Mody were fired in May 2006 during a company probe over backdating.

In December, the Camarillo-based company said former managers backdated stock option grants and altered documents to cover it up.

The settlement, subject to court approval, releases the company from agreements to pay legal fees for Tomasetta, Hovanec and Mody, according to the statement.

The agreement resolves the uncertainty of pending litigation and ends “significant legal expenses” in a court battle, CEO Christopher R. Gardner said.

The settlement resolves all federal securities class-action and related federal and state court lawsuits, the company said.

Vitesse also agreed to improve corporate governance and contribute 7.5 million common shares to the settlement fund.