Maxim Integrated is hit with fraud charges

ByABC News
December 5, 2007, 2:03 AM

— -- Federal regulators filed fraud charges Tuesday against Maxim Integrated Products and two of the company's former top executives, continuing the government's two-year-long crackdown on stock-option backdating.

The Securities and Exchange Commission, in a civil complaint filed in U.S. District Court in San Jose, alleged that Silicon Valley chipmaker Maxim, former CEO John Gifford and former chief financial officer Carl Jasper filed false financial information when they backdated stock-option grants for Maxim employees and executives.

Maxim and Gifford, without admitting or denying guilt, settled with the SEC. Gifford agreed to pay $800,000 in disgorgement, penalties and interest, according to SEC co-acting regional director Marc Fagel in San Francisco.

But the case continues against Jasper. The SEC alleges that he helped Maxim hide tens of millions of dollars in compensation expenses by backdating paperwork on option grants to make it look as if the options had been granted on an earlier date, when the company's stock price was lower.

Jasper knew of the backdating practices and also ignored instructions from Gifford to properly account for some of the options, the SEC alleged.

As a result, Maxim failed to report the compensation expenses and overstated its net income by more than 10% for the company's fiscal years from 2003 to 2005, the SEC charged.

Fagel said the SEC was concerned about Jasper "abandoning his role as corporate gatekeeper and instead facilitating Maxim's misrepresentations about its stock-option program and financial condition."

Jasper's attorney, Steven Bauer of Latham & Watkins in San Francisco, was not immediately available for comment Tuesday.

In the past two years, the SEC, the Justice Department and the Internal Revenue Service launched more than 200 investigations and inquiries into questionable backdating pay practices by companies. Dozens of executives have pleaded guilty to fraud-related charges, while many of the cases have been settled without charges or trials.