COLORADO SPRINGS, Colo. — A special committee appointed by the Vitesse Semiconductor Corp. board of directors reported Tuesday (Dec. 19) that its investigation shows former members of senior management manipulated the grant dates of stock options ''over a number of years.''
The board, consisting of Board of Directors members Edward Rogas and Moshe Gavrielov, said that there was no evidence current members of management or the board engaged in such practices.
Vitesse was among the first wave of technology companies suspected of backdating options, and initial reports led to the resignation of long-time chief executive Lou Tomasetta.
In addition to backdating, the special board found that the former management team ''utilized improper accounting practices primarily related to revenue recognition and inventory, and prepared or altered financial records to conceal those practices.''
The special board predicted that it would be unlikely the company would be able to prepare and publish audited restated financial statements for the fiscal years ending in September 2004 and 2005.
The board recommended the adoption of new corporate governance practices, and dismissed KPMG LLP as its public accountant, based on its ''lack of independence.''
The total expense to the company related to the backdating was estimated by the special board to be $120 million. It said that the unnamed executives who had been responsible for backdating altered documents to conceal the practices from the board.
Other questionable accounting practices raised by the special board included the failure to record credits for returned merchandise; failure to record inventory in appropriate time periods; recording false sales invoices; permitting merchandise returns greater than customers' allowed levels; misapplication of cash from customers to older accounts receivable; and recording journal entries that overrode Vitesse's internal controls.
While the board did not mention the executives believed to be responsible for the actions, the three placed on administrative leave in April 2006 were Tomasetta, former chief financial officer Yatin Mody, and former executive vice president Eugene Hovanec