Securities Law

Internal Probe Protects KLA-Tencor


An outside lawyer’s aggressive internal investigation of stock-options backdating has helped a semiconductor equipment company avoid serious penalties.

KLA-Tencor agreed to a permanent injunction yesterday against violations of record-keeping laws in a civil settlement with the Securities and Exchange Commission, the Recorder reports. The SEC cited the company’s “extraordinary cooperaton” in a press release. KLA-Tencor did not admit or deny the backdating charges.

However, the company’s ex-CEO didn’t fare as well. The SEC filed a civil suit yesterday against Kenneth Schroeder accusing him of engineering a scheme to backdate stock options, the San Jose Mercury News reports. Schroeder’s lawyer says he denies the charges.

The light corporate penalty is notable in light of harsher punishments for two other Silicon Valley companies, the Mercury News says. Brocade Communications Systems paid $28 million and Mercury Interactive paid $7 million to settle SEC charges.

Leading the internal corporate probe was Richard Marmaro, a partner with Skadden, Arps, Slate, Meagher & Flom. The Recorder says he conducted “long and sometimes uncomfortable interviews” with corporate officials and named employees to blame for options problems in a comprehensive account provided to authorities.

The SEC claims Schroeder ignored legal advice about accounting requirements for options grants. The SEC obtained e-mails in an effort to build its case with a January subpoena issued to outside counsel Wilson Sonsini Goodrich & Rosati.

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