Vitesse Semiconductor Corporation, Louis R. Tomasetta, Eugene F. Hovanec, Yatin D. Mody, and Nicole R. Kaplan

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22825 / September 27, 2013

Accounting and Auditing Enforcement Release No. 3495 / September 27, 2013

Securities and Exchange Commission v. Vitesse Semiconductor Corporation, Louis R. Tomasetta, Eugene F. Hovanec, Yatin D. Mody, and Nicole R. Kaplan, Civil Action No. 10 Civ. 9239 (JSR) (S.D.N.Y., filed December 10, 2010)

Executives to be Permanently Enjoined, to Pay Civil Penalties and Disgorgement, and to be Barred for Ten Years from Serving as an Officer and Director of any Public Company

The Commission also Determines Not to Seek Civil Penalties Against Two Other Former Senior Vitesse Employees Based on Their Cooperation

The Securities and Exchange Commission today settled civil fraud charges against Louis R. Tomasetta, the former Chief Executive Officer and a former Director of Vitesse Semiconductor Corporation (Vitesse), and Eugene F. Hovanec, a former Vice President of Finance, Chief Financial Officer, and Executive Vice President of Vitesse, arising from alleged schemes to improperly recognize revenue and backdate stop option grants.

On December 10, 2010, the Commission charged Tomasetta and Hovanec, and two other former senior Vitesse employees, with perpetrating a scheme from September 2001 to April 2006 to improperly inflate Vitesse's revenues through channel stuffing and the failure to timely record credits. The Commission also charged Tomasetta and Hovanec with perpetrating a scheme from 1995 to 2006 to backdate stock option grants and to fail to record millions of dollars in compensation expenses associated with the backdated grants. Finally, the Commission alleged that Tomasetta and Hovanec attempted to cover-up their options backdating scheme by fabricating fraudulent meeting minutes of the Compensation Committee of Vitesse's Board.

Without admitting or denying the allegations in the Commission's complaint, Tomasetta consented to the entry of a final judgment permanently enjoining him from violating and/or aiding and abetting violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5, as well as the financial reporting, record-keeping, internal controls, false statements to auditors, proxy, and securities reporting provisions of the federal securities laws. Tomasetta also agreed to be barred from serving as an officer or director of any public company for ten years. Tomasetta will pay $2,126,450 in disgorgement, in satisfaction of the Commission's claim to recover the "in-the-money benefit" from his exercise of backdated stock option grants, and a $100,000 civil penalty. Under the terms of the settlement, Tomasetta's disgorgement shall be deemed satisfied by his prior payment of $1,200,000 and his transfer of 814,655 shares of Vitesse stock to the class action Settlement Fund in Louis Grasso v. Vitesse Semiconductor et.al., No CV 06-02639 R (CTx) (C.D. Cal.).

Without admitting or denying the allegations in the Commission's complaint, Hovanec consented to the entry of a final judgment permanently enjoining him from violating and/or aiding and abetting violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5, as well as the financial reporting, record-keeping, internal controls, false statements to auditors, and securities reporting provisions of the federal securities laws. Hovanec also agreed to be barred from serving as an officer or director of any public company for ten years. Hovanec will pay $781,280 in disgorgement, in satisfaction of the Commission's claim to recover the "in-the-money" benefit from his exercise of backdated stock option grants, and a $50,000 civil penalty. Under the terms of the settlement, Hovanec's disgorgement shall be deemed satisfied by his prior payment of $250,000 and his transfer of 458,014 shares of Vitesse stock to the class action Settlement Fund in Louis Grasso v. Vitesse Semiconductor et.al., No CV 06-02639 R (CTx) (C.D. Cal.).

The settlements are subject to the approval of the United States District Court for the Southern District of New York.

The Commission also determined that it would not seek to impose civil monetary penalties against two other defendants-former Vitesse Controller and Chief Financial Officer Yatin D. Mody and former Vitesse Director of Finance Nicole R. Kaplan-due to their timely and substantial cooperation in the Commission's investigation and litigation.

On December 10, 2010, the Commission filed civil fraud charges against Mody and Kaplan for their participation in the revenue recognition scheme, and entered into bifurcated settlements with each of them, on a neither admit nor deny basis. Mody agreed to entry of a judgment permanently enjoining him from violating and/or aiding and abetting the antifraud, reporting and record-keeping provisions of the federal securities laws; permanently barring him from serving as an officer or director of any public company; ordering him to pay $162,320 in disgorgement and prejudgment interest; and providing that, upon motion of the Commission, the court would determine the appropriateness and amount of any civil penalty. Kaplan agreed to entry of a judgment permanently enjoining her from violating and/or aiding and abetting the antifraud, reporting and record-keeping provisions of the federal securities laws; ordering her to pay $47,495 in disgorgement and prejudgment interest; and providing that, upon motion of the Commission, the court would determine the appropriateness and amount of any civil penalty. Both Mody and Kaplan also agreed to permanent suspensions from appearing or practicing before the Commission as accountants. See Litigation Release No. 21769 (December 10, 2010).

The Commission previously filed settled charges in this matter against Vitesse. On December 10, 2010, the Commission charged Vitesse with fraud and other securities violations based on the revenue recognition and stock option backdating schemes noted above. Vitesse settled the matter, on a neither admit nor deny basis, by agreeing to pay a $3 million dollar penalty and to be permanently enjoined from violating the antifraud, reporting, record keeping and proxy statement provisions of the federal securities laws. See Litigation Release No. 21769 (December 10, 2010).