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The discovery period of the backdating drama is largely behind us - it seems like all the special committees that were formed last year to examine suspicious awards have finished their work and cleansed corporate consciences.

Now we’re in the prosecution phase, where most of the activity is going to be initiated by the SEC. The agency’s machinery has been clicking along a bit faster lately, and yesterday the Commission announced that it was filing backdating-related charges against semiconductor company KLA-Tencor and its former CEO Kenneth Schroeder.

The routine backdating schemes overstated KLA-Tencor’s net income in fiscal years 1998 through 2005 by as much as 156 percent.

The company settled with the SEC by “consenting to a permanent injunction against violations of the reporting, books and records, and internal controls provisions of federal securities laws;” it wasn’t charged with fraud, and no monetary penalty was sought by the Commission because of the company’s cooperation in the Commission’s investigation and its extensive remedial measures. Kudos to the firm for staving off SEC action that would have caused the current shareholders to suffer any monetary damages.

The former CEO, on the other hand, has still got the worst ahead of him. The Commission charges that “he repeatedly engaged in backdating after becoming CEO in 1999, including pricing large awards of options to himself that were “in the money” by millions of dollars - a potential windfall never disclosed to KLA-Tencor’s shareholders. According to the complaint, Schroeder received a legal memorandum in March 2001 cautioning that “the Board and its committees are limited in their ability to grant options at a retroactive price without exposing the company to risk of an accounting charge.” The memo further warned that “[a]ny attempt to set a price before such a grant is made raises substantial risks under securities and tax laws [and] accounting rules and gives rise to disclosure obligations.” The Commission alleges that Schroeder nonetheless continued to backdate options.”

Sounds like backdating options is just like eating salted peanuts - who can eat just one?