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KLA-Tencor options debacle takes a deeper turn toward the scandalous |
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Jan 30, 2007 at 11:07 AM |
An article in today's San Jose Mercury News reveals disturbing new details about the KLA-Tencor stock options backdating debacle.
Headlined "KLA Admits Falsification: SJ company restates results, takes $370 million in charges," the story says the company admitted yesterday that "former officials intentionally (my emphasis) priced stock options retroactively and falsified documents." The misdated options were handed out mostly from 1997 to 2002, not only in violation of the law but of KLA-T's own option plan rules. The company's report also offered more details on the special committee investigation that led to the ouster of company honchos Ken Levy, Ken Schroeder, Jon Tompkins, and Stuart Nichols.
The story also said that "the backdated options were spread out among KLA-Tencor's employees, the company said, noting that just 15 percent of them were given to executive officers. However, despite the fact that employees far and wide benefited from grants that violated the company's stock plans, the company has no plans to force the vast majority of those employees to hand over their backdated options."
Note how the wording says "the vast majority of those employees": Does this mean a small minority, say those who were then senior managers, directors, and VPs, might actually have to cough up those old options? Even if most of the employees who benefitted knew nothing of the execs' gaming of the options system, were a select few in on the scam? Might this group include any of the company's current leadership group or those who have moved on to executive roles in other semiconductor equipment or technology companies?
The former KLA-T Kahuna under the darkest cloud of suspicion appears to be Ken Schroeder, who had his backdated options canceled and was fired in October because of his alleged complicity in the shenanigans discovered by the company's own investigation. The Merc article notes that Schroeder's attorney "has warned the company that Schroeder plans to contest his firing and the cancellation of his options."
The question remains whether future legal actions around the KLA-T options scandal will go in a civil or criminal direction---or both. Imagine Ken Schroeder being led off in handcuffs: such an image would not only send shockwaves through his former company, but through the entire semiconductor manufacturing community.
Yet despite the financial, legal, and morale setbacks, KLA-T's position as the leading process control and yield management supplier has not---and should not----suffer adversely. The strength and depth of its product lines and technologies, its pervasive installed base, the quality of the people, and its solid customer relationships are key components to the company's success. Now that the dirty laundry---or at least a good portion of it---has been aired, the focus at KLA-T should return to business as usual.
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