Press Release: SEC Files Action Against Integrated Silicon Solution and Its Former CFO for Improper Stock Options Backdating
The SEC charged Integrated Silicon Solution, Inc. and its former CFO Gary L. Fischer with an eight-year scheme to backdate over 60 stock option grants covering nearly 14 million shares, concealing over $100 million in compensation expenses and causing a 528% net income overstatement in 2004, resulting in Fischer paying $539,830 in penalties and a five-year officer/director ban, while ISSI settled with a permanent injunction and acknowledged cooperation.
The SEC alleged that Integrated Silicon Solution, Inc. (ISSI) and its former CFO Gary L. Fischer engaged in an eight-year fraud by backdating stock option grants to avoid reporting compensation expenses, resulting in over $100 million in concealed costs and a 528% overstatement of net income in fiscal year 2004. Fischer personally benefited by receiving backdated options he later exercised for undisclosed profits, while orchestrating nearly 14 million options across more than 60 fraudulent grants using hindsight to select dates when stock prices were artificially low. Fischer settled without admitting guilt, agreeing to pay $414,830 in disgorgement and interest, a $125,000 civil penalty, and a five-year ban from serving as an officer or director; ISSI also settled with a permanent injunction, acknowledging failures in internal controls and financial reporting, with the SEC noting its cooperation during the investigation.
The SEC filed charges against Integrated Silicon Solution, Inc. (ISSI) and its former CFO, Gary L. Fischer, for orchestrating an eight-year fraudulent scheme to backdate stock option grants from 1997 to 2005, concealing over $100 million in compensation expenses by falsely recording grant dates at historical stock price lows. Fischer, acting as the company’s financial gatekeeper, used hindsight to select grant dates that coincided with monthly or quarterly stock price troughs, then fabricated committee resolutions to make it appear options were granted on those earlier dates, thereby avoiding required accounting expenses under GAAP. Over 60 backdated grants covering nearly 14 million options were issued, leading to materially misleading financial statements that overstated net income by 528% in fiscal year 2004 and distorted results across multiple fiscal years. Fischer personally profited by exercising backdated options he received, reaping undisclosed gains while failing to disclose the true cost of compensation. Without admitting or denying the allegations, Fischer agreed to pay $414,830 in disgorgement and interest, a $125,000 civil penalty, and a five-year bar from serving as an officer or director of any public company. ISSI also settled, consenting to a permanent injunction against violations of antifraud, reporting, internal controls, and books and records provisions, with the SEC acknowledging its cooperation during the investigation. The case underscored systemic abuses in executive compensation reporting and the critical role of CFOs in ensuring accurate financial disclosures.
Extracted insights
- $415K $414,830 $100K–$1M
- $125K $125,000 $100K–$1M
- person backdated grants
- person backdated options
- person backdating scheme
- person materially misleading disclosures
- agency Securities and Exchange Commission
- SEC Filed Charges Against Integrated Silicon Solution, Inc. and Gary L. Fischer
- Integrated Silicon Solution, Inc. and Gary L. Fischer Engaged In Fraudulent Scheme to Backdate Stock Option Grants
- ISSI and Fischer Concealed Millions of Dollars of Stock Option Compensation Expenses
- Fischer and ISSI Settled The Matter
- ISSI Used In-the-Money Grants to Make Up for Salary Cuts
- Fischer Caused Over 60 Backdated Grants
- Fischer Used Hindsight to Select Option Grant Dates
- ISSI Avoided Reporting Expenses in Financial Statements
- Backdated Grants Resulted In Materially Misleading Disclosures
- Fischer Personally Benefited From Backdating Scheme
- Fischer Received Backdated Options
- Fischer Agreed to Settle By Paying $414,830 in Disgorgement and Interest and a $125,000 Civil Penalty
- ISSI Agreed to Settle The Matter
SEC Files Action Against Integrated Silicon Solution and Its Former CFO for Improper Stock Options Backdating FOR IMMEDIATE RELEASE 2007-155 Washington, D.C., August 1, 2007 - The Securities and Exchange Commission today filed charges against Silicon Valley semiconductor company Integrated Silicon Solution, Inc. (ISSI) and its former Chief Financial Officer, Gary L. Fischer, alleging that they engaged in a long-running fraudulent scheme to backdate stock option grants. The Commission alleges that ISSI and Fischer concealed millions of dollars of stock option compensation expenses by providing executives and employees with potentially lucrative in-the-money options while backdating the grants to avoid reporting the expenses to investors. Both Fischer, of Santa Clara, Calif., and ISSI, settled the matter without admitting or denying the Commission's charges. Linda Chatman Thomsen, the SEC's Director of Enforcement, stated, "This case further highlights the ways in which certain companies have abused option grants. Among other things, ISSI used in-the-money grants to make up for salary cuts, while avoiding the need to report the expenses by improperly backdating the options." Marc J. Fagel, Associate Regional Director of the SEC's San Francisco Regional Office, added, "As the company's Chief Financial Officer, Fischer was a gatekeeper who had an obligation to accurately account for and disclose the company's stock option expenses. Instead, he caused ISSI to make over 60 backdated grants covering almost 14 million stock options over an eight year period." The Commission's complaint against ISSI and Fischer, filed in the Northern District of California, alleges that Fischer routinely used hindsight to select option grant dates when ISSI's stock traded at or near monthly or quarterly lows, and at prices below the closing price on the date when Fischer actually selected the grant date. According to the complaint, the dates Fischer selected were then incorporated into Stock Option Committee resolutions and Compensation Committee minutes, even though the committees rarely, if ever, met on the date listed on the minutes and resolutions. Pricing the options below current prices would have required the company to report a compensation expense under well-settled accounting principles. By falsely documenting that the options had been granted on an earlier date, ISSI avoided reporting the expenses in its financial statements. The complaint alleges that the backdated grants resulted in materially misleading disclosures, with the company overstating its actual net income (as restated) or understating its actual net loss (as restated) in fiscal years 1997 through 2005, including a 528-percent overstatement of actual net income in fiscal year 2004. The Commission further alleges that Fischer personally benefited from the backdating scheme. Fischer received backdated options which he later exercised to reap undisclosed profits. Fischer, without admitting or denying the allegations of the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction against violations of the antifraud, books and records and other provisions of the federal securities laws; paying $414,830 in disgorgement and interest, and a $125,000 civil penalty; and consenting to an order barring him for five years from acting as an officer or director of a public company. ISSI, without admitting or denying the allegations in the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction against violations of the antifraud, reporting, internal controls, and books and records provisions of the federal securities laws. In determining to accept ISSI's settlement offer, the Commission considered the cooperation that ISSI provided the Commission staff during its investigation. # # # For more information, contact: Marc J. Fagel Associate Regional Director (415) 705-2449 Michael S. Dicke Assistant Regional Director (415) 705-2458 San Francisco Regional Office Additional materials: Litigation Release No. 20219 http://www.sec.gov/news/press/2007/2007-155.htm Home | Previous Page Modified: 08/01/2007
SEC Files Action Against Integrated Silicon Solution and Its Former CFO for Improper Stock Options Backdating FOR IMMEDIATE RELEASE 2007-155 Washington, D.C., August 1, 2007 - The Securities and Exchange Commission today filed charges against Silicon Valley semiconductor company Integrated Silicon Solution, Inc. (ISSI) and its former Chief Financial Officer, Gary L. Fischer, alleging that they engaged in a long-running fraudulent scheme to backdate stock option grants. The Commission alleges that ISSI and Fischer concealed millions of dollars of stock option compensation expenses by providing executives and employees with potentially lucrative in-the-money options while backdating the grants to avoid reporting the expenses to investors. Both Fischer, of Santa Clara, Calif., and ISSI, settled the matter without admitting or denying the Commission's charges. Linda Chatman Thomsen, the SEC's Director of Enforcement, stated, "This case further highlights the ways in which certain companies have abused option grants. Among other things, ISSI used in-the-money grants to make up for salary cuts, while avoiding the need to report the expenses by improperly backdating the options." Marc J. Fagel, Associate Regional Director of the SEC's San Francisco Regional Office, added, "As the company's Chief Financial Officer, Fischer was a gatekeeper who had an obligation to accurately account for and disclose the company's stock option expenses. Instead, he caused ISSI to make over 60 backdated grants covering almost 14 million stock options over an eight year period." The Commission's complaint against ISSI and Fischer, filed in the Northern District of California, alleges that Fischer routinely used hindsight to select option grant dates when ISSI's stock traded at or near monthly or quarterly lows, and at prices below the closing price on the date when Fischer actually selected the grant date. According to the complaint, the dates Fischer selected were then incorporated into Stock Option Committee resolutions and Compensation Committee minutes, even though the committees rarely, if ever, met on the date listed on the minutes and resolutions. Pricing the options below current prices would have required the company to report a compensation expense under well-settled accounting principles. By falsely documenting that the options had been granted on an earlier date, ISSI avoided reporting the expenses in its financial statements. The complaint alleges that the backdated grants resulted in materially misleading disclosures, with the company overstating its actual net income (as restated) or understating its actual net loss (as restated) in fiscal years 1997 through 2005, including a 528-percent overstatement of actual net income in fiscal year 2004. The Commission further alleges that Fischer personally benefited from the backdating scheme. Fischer received backdated options which he later exercised to reap undisclosed profits. Fischer, without admitting or denying the allegations of the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction against violations of the antifraud, books and records and other provisions of the federal securities laws; paying $414,830 in disgorgement and interest, and a $125,000 civil penalty; and consenting to an order barring him for five years from acting as an officer or director of a public company. ISSI, without admitting or denying the allegations in the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction against violations of the antifraud, reporting, internal controls, and books and records provisions of the federal securities laws. In determining to accept ISSI's settlement offer, the Commission considered the cooperation that ISSI provided the Commission staff during its investigation. # # # For more information, contact: Marc J. Fagel Associate Regional Director (415) 705-2449 Michael S. Dicke Assistant Regional Director (415) 705-2458 San Francisco Regional Office Additional materials: Litigation Release No. 20219 http://www.sec.gov/news/press/2007/2007-155.htm Home | Previous Page Modified: 08/01/2007