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3 Ex-California Micro Execs Settle SEC Fraud Charges

April 02, 1998|From Bloomberg News

California Micro Devices Corp.'s former president, Surendra Gupta, and two other former executives have agreed to pay a total of $386,762 to settle charges they fraudulently inflated the company's sales in fiscal 1994.

The Securities and Exchange Commission also charged the two former plant managers, Bhasker Rao and R. Ramana Penumarty, with illegal insider trading to avoid losses of $128,588.

"This is one of the biggest financial reporting frauds we've seen in Silicon Valley," said William Kimball, SEC branch chief in San Francisco.

Gupta agreed to pay a $72,250 fine and to be permanently barred from serving as an officer or director of a public company in order to settle the SEC allegations. He faces a criminal trial on similar charges in June.

Rao, who managed the company's Tempe, Ariz., plant, agreed to pay $170,432 in fines and restitution, and Penumarty, who managed California Micro Devices' plant in Milpitas, agreed to pay $144,080 in fines and restitution. They were barred from serving as an officer or director of a public company for five years.

Under the settlement, the three individuals neither admitted nor denied the allegations. All three either had no comment or their lawyers did not return calls.

Milpitas-based California Micro Devices, which makes computer chips, was not charged by the SEC in the case and had no comment on the settlements announced by the SEC.

Shares in the company fell 19 cents to close at $5.88 on Nasdaq.

The SEC alleged the three former executives artificially inflated the company's reported sales in fiscal-year 1994 by ordering employees to falsify documents.

The documents indicated that goods had been shipped when, in most cases, they hadn't even been manufactured, according to the SEC complaint filed in federal court in San Francisco.

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