Updated: Feds reportedly probing KLA-Tencor options grants

SAN FRANCISCO — Chip equipment giant KLA-Tencor Corp.'s chief financial officer said Monday (May 22) that U.S. federal prosecutors are investigating the timing of stock option grants made by the company, according to online reports by Market Watch and Investor's Business Daily.

KLA-Tencor has formed an independent board panel to probe options grants over the past 10 years, according to the reports, which cited CFO Jeff Hall, speaking at an investment conference here.

The reported admission follows closely on the heels of a Monday article in the Wall Street Journal, which named KLA-Tencor among five companies whose historical stock options granting practices have been newly called into question through analysis.

The Journal story focused on ten options grants given by KLA-Tencor to Ken Levy, now chairman of the company's board of directors, between 1994 and 2001. These grants all preceded sharp increases in the company's stock price, according to the article. The paper's analysis found that the probability that the timing of these grants occurred randomly was roughly 20 million to one, according to the article.

Calls to KLA-Tencor by EE Times seeking comment were not immediately returned.

Also among the companies whose historical stock options granting practices were called into question by the latest Journal story was Trident Microsystems Inc. (Sunnyvale, Calif.), a provider of digital television SoCs. According the article, seven grants given to Chairman and CEO Frank Lin between 1995 and 2001 immediately preceded sharp increases in the company's stock price — 67 percent in one case. The analysis found that the odds against the timing of these grants occurring randomly is roughly 100 million to one.

KLA-Tencor's share price closed down more than 10 percent while Trident's stock tumbled nearly 13 percent in Nasdaq trading Monday.

KLA-Tencor and Trident are the latest in a string of companies whose historical stock options granting practices have been questioned. Much of the attention on this issue was sparked by a March 18 Journal article. Since then, programmable logic vendor Altera Corp. (San Jose, Calif.), Vitesse Semiconductor Corp. (Camarillo, Calif.) and fab automation provider Brooks Automation Inc. (Chelmsford, Mass.), as well as several non-electronics companies, have all publicly announced internal investigations into historical stock options granting practices. One company, IC provider Power Integrations Inc., announced that it was looking into its historical stock options granting practices prior to the publication of the March 18 story.

Contract manufacturing services provider Jabil Circuit Inc. said May 3 it was contacted by the U.S. Securities and Exchange Commission (SEC), but that an internal investigation of its stock option grant practices found no issues of backdating or improper procedures.

The name of fabless chip supplier Broadcom Corp. has also surfaced in connection with questions about historical stock options granting procedures. In a separate Journal story last week, Broadcom was cited as one of 17 companies found to have the highest risk of having backdated options in a report by the Center for Financial Research an Analysis (CFRA), a Maryland research firm.