Michael Ross was fired and blamed for two corporate scandals at Atmel Corp. — but now the former general counsel is fighting back.
Ross has filed a lawsuit, claiming the San Jose, Calif., semiconductor company ruined his reputation when it pointed the finger at him and others for the company’s stock option backdating problems, which led to a $125 million financial restatement. Having been fired along with other Atmel executives in 2006 after an investigation into the misuse of travel funds, Ross became an easy scapegoat when the company faced a mounting backdating mess a year later, his lawyers say.
Many lawyers in Ross’ position bore the brunt of the blame for the backdating scandal that swept Silicon Valley’s tech companies. They were fired; they were pursued by the government for overseeing the illegal practice of fudging dates to grant stock options at low prices and not properly accounting for it. But few have fought back with lawsuits like this.
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When it released the results of its internal probe to the world, it laid the blame squarely on Perlegos and Ross in an April 2007 press release.
"Mr. Ross was aware of, and participated in the backdating of, stock options," the release blared, although the company’s audit committee conceded that Ross may have not understood the tricky accounting implications of backdating until 2002. It also leveled accusations that Ross backdated his own stock options.
In his lawsuit, Ross said the press release damaged his career and counts as defamation: "As a result of the reckless, false and misleading comments made by Atmel regarding Ross’ culpability in Atmel’s stock option troubles, Ross has had significant difficulty obtaining employment commensurate with his experience and background."
As the story continues, after the travel investigation, Atmel went through one of the most bitter corporate struggles for control in recent Silicon Valley memory, resulting in the ouster of the brothers who founded the company, with whom Ross was close.
Most interesting to me, however, is how Atmel covered its bases dealing with the travel scandal, but not the backdating scandal. Take note:
An internal investigation of Davani led to the Perlegos brothers, Ross and another executive.
Daniel Bergeson and his team found that the executives had been paying small amounts in return for lots of travel on the company’s dime …
In the end, the executives contested the travel scandal findings, claiming it was a ploy to oust the management. The company got Morrison & Foerster to double-check Bergeson’s investigation — and the MoFo lawyers concluded it was fair.
"Double-check." Reminds me of a recent derivative suit here in Pennsylvania, which the company got dismissed because it had hired outside counsel to conduct an independent investigation.
Which is exactly what Atmel did for the travel funds but not, apparently, for the backdating. Now, they might pay the price.
Hiring independent counsel for an investigation is expensive. It’s inconvenient. It may end up being unnecessary, or it may end up revealing troubling facts and recommending painful remedies. But it is, bar none, the best prophylactic a company can take when it finds itself in trouble.