Atmel to take $125M backdating charge

By Colleen Taylor, Contributing Editor -- Electronic News, 4/30/2007

Atmel Corp. today announced the completion of its independent investigation into its stock option granting records, and said that its now-apparent history of fraudulent backdating will cost the company some $125 million in compensation charges.

The semiconductor company began reviewing its historical stock option granting practices in early June, as the United States' government launched an industry-wide crackdown on the practice of illegal backdating. In October, Atmel announced that financial statements for all prior periods should no longer be relied upon as the company had, indeed, discovered evidence of illegal backdating practices. Last month, the company said that it would file its financial forms that had been delayed by its ongoing probe to the Securities and Exchange Commission (SEC) by early June. The company has also received an informal request for information relating to past stock options grants from the San Francisco district office of the SEC, with which it said today it continues to cooperate fully.

Atmel is by no means the only semiconductor company that has had to pay in a very tangible way for its history of fraudulent stock options activity. In January, Broadcom Corp.'s restatements to the SEC cost the company a whopping $2.2 billion in backdating-related charges. In October, KLA Tencor announced it would take a $400 million charge.

The good news for Atmel’s shareholders is that its misdeeds seem to be a thing of the past. Atmel said today it has determined that the $125 million in stock-based compensation adjustments are required for a period that began in 1993 and continued through January 2004. According to Atmel, the audit committee that conducted the probe found that after January 2004 the company improved its stock option granting processes, and has since granted stock options in accordance with the necessary approval procedures.

As for its decade-long history of fraudulent financial accounting, the San Jose-based company has pointed the finger at its former CEO George Perlegos for being one of two people "primarily responsible" for directing the backdating.

"Perlegos was aware of, and often directed, the backdating of stock option grants," Atmel said in today's statement. Evidence of Perlegos' participation in the fraud included "handwritten notations from Perlegos expressly directing stock administration employees to use prior board meeting dates for many employees' stock option grants … [which] showed that Perlegos circumvented the company's stock option plan requirements and granting procedures," the company said.

Also found to allegedly be behind the backdating was former general counsel Mike Ross, who handled communications with the board of directors regarding stock options and, during certain periods, supervised Atmel's stock administration department.

Perlegos and Atmel have been at odds for some time now. Since being fired along with his brother, former CFO Gust Perlegos, and Ross in August 2006 for allegedly misusing corporate travel funds, Perlegos has accused the company of unlawful and improper termination and has launched an aggressive campaign to replace the company's current board and restructure its business model.

Atmel, meanwhile, has urged its shareholders to vote down Perlegos' proposals at a shareholder meeting on the matters scheduled for May 18.