The Securities and Exchange Commission has charged semiconductor maker Marvell Technology Group and its co-founder with backdating employee stock option grants.
Without admitting or denying the allegations, Marvell agreed to settle the charges by paying a $10 million civil penalty, while former chief operating officer Weili Dai will pay an additional $500,000. Dai also consented to an order barring her from serving as an officer or director of a public company for five years.
The complaint alleges that Marvell granted potentially lucrative "in-the-money" options at below-market prices to employees and later backdated them rather than report the compensation expenses to shareholders. The SEC alleged that Dai, acting as Marvell's "stock option committee," routinely reviewed lists of Marvell's historical stock prices and picked the date with the lowest, or one of the lowest, stock prices since the previous grant date.
This date would then be communicated to Marvell personnel as the date on which the stock option committee had purportedly met and authorized the option grant. To make it appear that Marvell had actually granted the options on that date, Dai signed falsified minutes attesting to a meeting of the committee on that earlier date.
The scheme allowed Marvell to overstate its income by $362 million for fiscal years 2000 through 2006. After a review by a special board committee, Marvell took a cumulative pre-tax stock-based compensation expense of $327.4 million last July.
