Risk Management

Rambus Settles Most Backdating Claims

Chip maker ends its review, recommending that all derivative claims be ended except those against ex-SVP Ed Larsen.
Stephen TaubAugust 28, 2007

Rambus Inc. said it has settled claims against all but one former officer stemming from a review of past stock option grants. In a press release, the Los Altos, Calif.-based chip maker added that the settlements are conditioned on the dismissal of the claims asserted against them in derivative actions.

The total value of the settlements exceeds $6.5 million in cash and cash equivalents as well as the value relating to the relinquishment of claims to over 2.7 million stock options.

Rambus said claims will be maintained against Ed Larsen, who served as vice president of human resources from September 1996 until December 1999, and then as senior vice president of administration until July 2004.

Reached by CFO.com, an attorney for Larsen, Stephen Mansfield of the San Francisco firm of Akin Gump, called the civil claim against his client meritless. “The grant dating practices at Rambus were well known throughout the company,” Mansfield said. “He was an HR director, not a lawyer or accountant responsible for appropriate accounting and disclosures. If the case is not dismissed before trial, we are confident he will prevail at trial.”

Last October, Rambus said that a probe by its audit committee found that “a significant number” of stock option grants were not correctly dated or accounted for, forcing it to take pre-tax, non-cash stock-based compensation charges in excess of $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. It said that directors and the audit committee “have full faith in the integrity” of Hughes, who has been CEO since January 2005, and Rishi, CFO since April 2006. The findings of the investigation, the company’s statement noted at the time, “do not implicate them in any misconduct.”

In August 2006, CFO.com reported that Geoff Tate, who headed the Rambus from 1990 through 2005, had resigned from the company’s board because of his past role in the company’s issuance of apparently misdated stock option grants.

On July 19, 2007, the company’s audit committee had reached a preliminary conclusion that the actual measurement dates for a number of stock option grants issued during Tate’s tenure differ from the recorded grant dates for the awards.

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