Risk Management

Rambus Settles Options-Driven Class Action

The $18 million agreement comes on the heels of a derivative settlement in which former officers agreed to pay $6.5 million.
Stephen TaubSeptember 10, 2007

Rambus Inc. has agreed to pay $18 million to settle a class-action suit that had questioned the company’s accounting for stock-option grants. The settlement would lead to a dismissal of all claims against all defendants in the litigation.

The settlement is subject to final documentation as well as final court approval. The chip-maker said it would continue talking with its insurers about what they might contribute to the settlement amount.

In a separate matter, Rambus announced last month that it had settled derivative lawsuits filed in the name of the company against a number of former executives, who agreed to pay it 6.5 million in cash and cash equivalents and give up claims to over 2.7 million stock options. The company had filed the derivate claims in connection with an internal probe that found that some stock option grants issued by the company had been misdated.

The company said the settlements were conditioned on the dismissal of the claims against the ex-officers. At the same time, Rambus said that claims would 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. Larsen’s attorney said in August that the claims against his client were meritless.

Last October, Rambus said that a probe by its audit committee found that “a significant number” of stock option grants weren’t correctly dated or accounted for, forcing it 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. 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.”

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