Brooks Automation settles options backdating case

Brooks Automation Inc. on Monday became the ninth company in a year to settle federal allegations of improper backdating of stock options.

The maker of software and semiconductor manufacturing equipment was accused by regulators of inflating its income by $64.5 million over 10 years by failing to count the options as expenses.

Brooks Automation was not fined under the settlement with the Securities and Exchange Commission, which cited the company's "swift, extensive and extraordinary" cooperation in the case as a reason for the leniency.

The company, based in Chelmsford, Mass., neither admitted nor denied the SEC's allegations made in a civil lawsuit filed in federal court in Boston. It did, however, agree to refrain from future violations of the securities laws.

The SEC alleged that improper backdating of employee stock options by Brooks Automation's former chief executive, Robert J. Therrien, and incorrect accounting by the company resulted in the filing of misleading financial disclosures from 1996 to 2005.

Therrien was indicted in July 2007 on federal tax-evasion charges and accused by the SEC of manipulating stock options to improperly enrich himself by more than $10 million. Therrien, who retired as the company's CEO in 2004 and completed his term as chairman in early 2006, has denied the criminal and civil allegations.

Stock options give employees the right to buy shares of stock at a predetermined time. Especially popular in Silicon Valley during the high-tech boom, they're a coveted incentive to lure and keep talent, particularly when granted by newly public companies with the opportunity for rapid growth.

Backdating options make the rewards even more lucrative by retroactively setting the exercise price to a low point in the stock's value. Usually, a stock option's exercise price coincides with the market value at the time of a grant to give the recipient an incentive to drive the price higher.

If companies backdate options without properly disclosing and accounting for the move, it can cause profits to be overstated and taxes to be underpaid.

Suspect timing of stock option awards to executives and employees became corporate America's biggest scandal in 2006, when it was discovered that numerous public companies around the country _ especially in Silicon Valley and the tech corridors of New England and the Eastern seaboard _ were manipulating the awards and failing to take appropriate charges against profits.

Counting Brooks Automation, the SEC has reached civil settlements with nine companies and at least 30 former executives over improper backdating since late 2006. At one point, the SEC was investigating more than 100 companies.

In addition, federal prosecutors have investigated scores of companies for options backdating, and at least 18 executives have been hit with criminal charges. Nine have pleaded guilty.

Last week, the SEC charged Broadcom Corp. co-founders Henry T. Nicholas III and Henry Samueli with falsifying the chip maker's reported income, leading to what is believed to be the largest accounting restatement yet _ more than $2 billion _ caused by backdating of stock options. The agency also charged Broadcom's former chief financial officer William J. Ruehle and general counsel David Dull.