Rambus Inc. is the latest company to announce that the Securities and Exchange Commission has terminated an informal investigation into its stock-option practices without recommending any enforcement action.
The announcement, however, did not come until a lot of damage was already done.
In July 2006, the chip maker’s audit committee reached a preliminary conclusion that the actual measurement dates for a number of stock-option grants issued during the tenure of Geoff Tate, who headed Rambus from 1990 through 2005, differed from the recorded grant dates for the awards. Tate resigned shortly thereafter.
Rambus announced in October 2006 that it was forced to take pre-tax, non-cash stock-based compensation charges of more than $200 million. The company also reaffirmed a prior determination that it would restate its financials for the three years ending 2005 and the first quarter of 2006.
In its announcement at the time, however, the company went out of its way to give a vote of confidence to CFO Satish Rishi and CEO Harold Hughes, assuring that their jobs were safe.
The audit committee found that from 1999 through 2003, Rambus had a regular practice for grants to new, non-executive employees that involved selecting the lowest share price between the employee’s start date and the end of that quarter. In fact, on certain occasions, individual employees had a formal employment start date that preceded the date on which they actually began work.
In August of this year, Rambus announced it had settled derivative lawsuits filed in the company’s name against a number of former executives, who agreed to pay $6.5 million in cash and cash equivalents and give up claims to more than 2.7 million stock options.
Rambus agreed in September to pay $18 million to settle a class-action suit that had questioned the company’s accounting for stock-option grants.