Accounting & Tax

Vitesse Restates, Names Acting CFO

The semiconductor firm, which put its CFO on leave amidst warnings of accounting problems, has hired a turnaround specialist. Its stock plummeted o...
Stephen TaubApril 27, 2006

Vitesse Semiconductor Corp. said it will restate its results going back more than three years and named a new acting chief financial officer as a result of an internal investigation relating to past stock option grants and other accounting and documentation issues.

It also said that the management report on internal controls over financial reporting as of September 30, 2005 and KPMG LLP’s report relating to the effectiveness of the company’s internal controls should not be relied upon.

Last week, the company announced that it had appointed a special committee of independent directors to conduct an internal investigation relating to past stock option grants and placed three executives, including CFO Yatin Mody, on administrative leave. At the time, it warned that those developments might lead to a restatement.

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In its announcement late Wednesday evening, Vitesse said that during the internal investigation, it discovered additional issues concerning the company’s practices in connection with credits issued to or requested by customers — for returned products or other reasons — and the related accounting treatment.

The company also added that its accounts receivable and revenues may have been misstated during certain periods, but that the extent of the misstatements is still being investigated.

The company said that even though the investigation is in its preliminary stages, it will restate its financial statements for the three months ended December 31, 2005 and the three years ended September 30, 2005. More restatements are possible in the future, it added. Vitesse has engaged C.A. Hassel, managing director of Alvarez & Marsal, LLC as acting CFO.

Vitesse’s stock dropped more than 20 percent on the news of the restatements, to around $2. During the tech boom of the late 1990s, Vitesse’s stock topped $100 per share.

The Wall Street Journal reported that Vitesse is one of at least a handful of companies that have said either their own boards or the Securities and Exchange Commission are looking at past option grants.

The paper noted that Louis R. Tomasetta, Vitesse’s chief executive, who was put on administrative leave last week, frequently received option grants dated ahead of large rises in the company’s share price. Eight of nine grants to Tomasetta between 1994 and 2001 were dated ahead of double-digit price gains in the next 20 trading days.