Former KLA-Tencor chief charged with fraud

NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission filed charges Wednesday against chipmaker KLA-Tencor Corp. and its former chief Kenneth Schroeder in connection with an alleged scheme to backdate stock option grants.

KLA concealed more than $200 million in stock option compensation since 1997, secretly backdating grants to avoid reporting the expenses to investors, according to an SEC complaint filed in federal district court in San Jose, Calif.

Former executives routinely backdated employee stock options to KLA's share price lows, which led to the company overstating its income from 1998 to 2005 by as much as 156 percent.

Schroeder himself, who was appointed CEO in 1999, repeatedly backdated options from 1999 through 2002, and once in 2005, the agency says, even after the company's counsel advised him that his actions were improper.

Schroeder allegedly priced large awards of options to himself that were "in the money" by millions of dollars - without disclosing them to KLA-Tencor's shareholders.

Without admitting or denying the allegations, KLA-Tencor said it reached a settlement with the SEC resolving investigations into the company's stock options practices.

KLA-Tencor (Charts) agreed to a permanent injunction from further violations of securities laws, was not charged with fraud and was not required to pay fines or damages as part of the settlement, the company said in a statement Wednesday.