Cirrus CEO steps down when faced with backdating evidence

By Colleen Taylor -- Electronic News, 3/8/2007

Faced with damning evidence of participation in illegal stock options backdating, yet another executive has bitten the dust . David French has resigned from his posts as president and CEO and as a director of Cirrus Logic Inc., effective today. French, 49, took the company's helm as CEO in 1999.

Cirrus Logic launched an internal review of its stock options granting history in September amid an industry-wide governmental crackdown on the illegal backdating of stock options. Today, the company announced the close of the investigation and that it did indeed turn up evidence of fraudulent activity.

But French is not the only one paying dearly for his misdeeds; the company's bottom line is sure to suffer, as well. In a statement released today, Cirrus Logic said it is now set to make restatements for periods of illegal backdating between 1997 and 2005 uncovered in its internal probe, and expects to record an additional cash stock-based compensation expense in the range of $22 million to $24 million.

Cirrus minced no words in placing part of the blame on French and other company heavyweights. "The special committee believes based on the evidence developed in the investigation that certain executive officers had knowledge of and participated in" the backdating scheme, "either with hindsight or prior to completing the formal approval process," Cirrus said in a statement today. However, the company added that the execs involved in the shady option granting are no longer with the company, with the exception of French.

"French was significantly involved in the grant approval process for certain grants and that he influenced the grant process with a view toward the stock price, and therefore the selection of grant dates, through his control over how quickly or slowly the process was completed," the statement said.  

His executive roles are not the only thing French has to give up due to the discovery of his stock options-related misdeeds. According to a Cirrus filing made today with the Securities and Exchange Commission (SEC), French will cancel and not exercise the option grants that the special committee identified as having "favorable grant dates that were selected  with the  participation  of company  executives." He will also re-price certain options and pay the company the difference  between the exercise price paid upon the exercise of any of his option grants and the exercise price "as determined to be appropriate upon the correct accounting measurement date."

Financial details of exactly how much in stock options French will have to surrender or pay back have not been disclosed. According to Forbes, French held a total of $3.78 million in stock options as of 2006.

But he will by no means walk away from Cirrus completely empty-handed: Also according to the SEC filing, French will receive a one-time severance payment of $477,600 to be paid six months following the date of his resignation. Cirrus also said it will immediately accelerate the vesting of another undisclosed portion of option grants, and French will be provided a post-employment period to exercise his vested options.

Cirrus Logic's board of directors has appointed Michael Hackworth as the company's acting president and CEO. He will continue to serve as chairman of the board, a position he has held since 1997. Hackworth, 66, who co-founded the company, previously served as president and CEO of Cirrus Logic from January 1985 to June 1998, and continued to serve as CEO until French took over in February 1999.