SEC Files Action Against Integrated Silicon Solution and Its Former CFO for Improper Stock Options Backdating

FOR IMMEDIATE RELEASE
2007-155

Washington, D.C., August 1, 2007 - The Securities and Exchange Commission today filed charges against Silicon Valley semiconductor company Integrated Silicon Solution, Inc. (ISSI) and its former Chief Financial Officer, Gary L. Fischer, alleging that they engaged in a long-running fraudulent scheme to backdate stock option grants. The Commission alleges that ISSI and Fischer concealed millions of dollars of stock option compensation expenses by providing executives and employees with potentially lucrative in-the-money options while backdating the grants to avoid reporting the expenses to investors. Both Fischer, of Santa Clara, Calif., and ISSI, settled the matter without admitting or denying the Commission's charges.

Linda Chatman Thomsen, the SEC's Director of Enforcement, stated, "This case further highlights the ways in which certain companies have abused option grants. Among other things, ISSI used in-the-money grants to make up for salary cuts, while avoiding the need to report the expenses by improperly backdating the options."

Marc J. Fagel, Associate Regional Director of the SEC's San Francisco Regional Office, added, "As the company's Chief Financial Officer, Fischer was a gatekeeper who had an obligation to accurately account for and disclose the company's stock option expenses. Instead, he caused ISSI to make over 60 backdated grants covering almost 14 million stock options over an eight year period."

The Commission's complaint against ISSI and Fischer, filed in the Northern District of California, alleges that Fischer routinely used hindsight to select option grant dates when ISSI's stock traded at or near monthly or quarterly lows, and at prices below the closing price on the date when Fischer actually selected the grant date. According to the complaint, the dates Fischer selected were then incorporated into Stock Option Committee resolutions and Compensation Committee minutes, even though the committees rarely, if ever, met on the date listed on the minutes and resolutions.

Pricing the options below current prices would have required the company to report a compensation expense under well-settled accounting principles. By falsely documenting that the options had been granted on an earlier date, ISSI avoided reporting the expenses in its financial statements. The complaint alleges that the backdated grants resulted in materially misleading disclosures, with the company overstating its actual net income (as restated) or understating its actual net loss (as restated) in fiscal years 1997 through 2005, including a 528-percent overstatement of actual net income in fiscal year 2004.

The Commission further alleges that Fischer personally benefited from the backdating scheme. Fischer received backdated options which he later exercised to reap undisclosed profits.

Fischer, without admitting or denying the allegations of the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction against violations of the antifraud, books and records and other provisions of the federal securities laws; paying $414,830 in disgorgement and interest, and a $125,000 civil penalty; and consenting to an order barring him for five years from acting as an officer or director of a public company.

ISSI, without admitting or denying the allegations in the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction against violations of the antifraud, reporting, internal controls, and books and records provisions of the federal securities laws. In determining to accept ISSI's settlement offer, the Commission considered the cooperation that ISSI provided the Commission staff during its investigation.

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For more information, contact:

Marc J. Fagel
Associate Regional Director
(415) 705-2449

Michael S. Dicke
Assistant Regional Director
(415) 705-2458

San Francisco Regional Office

  Additional materials: Litigation Release No. 20219

http://www.sec.gov/news/press/2007/2007-155.htm