Microsemi Corp. Chief Executive Officer James Peterson may have breached securities laws when he denied misrepresenting degrees from Brigham Young University, former lawyers for the Securities and Exchange Commission said.
Peterson, 53, categorically denied misrepresenting his degrees from Brigham Young, saying in a Dec. 3 statement that he was working with the university and expected it to confirm the degrees. The school's registrar reviewed its records again and concluded Peterson didn't receive the degrees.
"From the SEC's point of view, putting out a public statement is a much more serious occurrence than merely misrepresenting the status of one's degree,” said Robert Heim, a former assistant regional director of the SEC in New York. "The SEC would be interested in reviewing this matter to see why the CEO had done that."
The SEC has a range of sanctions it could impose in such cases, such as fines or public censure, said Heim, a securities lawyer at Meyers & Heim in New York. Peterson most likely fell foul of rules that require truthful statements in filings, Heim said.
Microsemi's stock fell 16 percent on Dec. 3 after Bloomberg News reported that Brigham Young said Peterson didn't earn undergraduate and masters of business administration degrees, contradicting his biography in regulatory filings.
That day, Peterson denied the report and said he expected Brigham Young to confirm his degrees, saying there may have been a mix-up with his name. His statement, issued at 1:07 p.m. New York time, prompted the shares to jump about 4.6 percent in the next 5 minutes. By the end of the day, after the university reiterated that Peterson didn't get the degrees, the shares had fallen 16 percent. They lost another 27 percent the next day.
Directors at Irvine, California-based Microsemi said on Dec. 4 that they supported Peterson and were reviewing his academic credentials.
"Jim's educational credentials in no way reflect on the strength of Microsemi, which has been an industry leader," the company said.
SEC spokesman John Nester declined to comment. Peterson responded to a request for comment by saying in an e-mail this morning that he was asking a colleague to contact Bloomberg News. Cliff Silver, a spokesman for Microsemi, and Robert Adams, head of investor relations, didn't return calls seeking comment.
Microsemi fell 63 cents to $13.13 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have declined 41 percent this year.
Peterson's public denial is potentially more problematic than misrepresenting his degrees, said Jacob Frenkel, a former SEC attorney in private practice in Rockville, Maryland.
“This is something that the company cannot ignore,” Frenkel said.
The SEC is showing an increasing interest in so-called “tone at the top” cases, as regulators try to ensure executive behavior is held to the highest standards, he said.
Microsemi Chairman Dennis Leibel said in last week's statement that there was no plan to alter Peterson's role. Peterson has run Microsemi, which makes chips for consumer products, medical systems and military equipment, since 2000, according to regulatory filings. In the year ended in September, the company's profit jumped fivefold to $49.7 million, while sales increased 16 percent to $514.1 million.
"It's fair to say that Jim Peterson and the management team have done a terrific job," Patrick Wang, an analyst at Wedbush Morgan Securities, said in an interview from Los Angeles. He recommends buying the shares, which he doesn't own personally. "Their revenues have been relatively unscathed."
Peterson was the second chip executive to come under fire last week over academic records. Broadcom Corp. fired Senior Vice President Vahid Manian on Dec. 3, after the University of California at Irvine said Manian didn't earn the degrees he claimed to have. Peterson said in an interview last week that he hired Manian when they both worked for Silicon Systems Inc.
Peterson's academic credentials are listed in SEC filings by STEC Inc., a Santa Ana, California-based maker of computer storage devices, where he is a director. STEC Chairman and CEO Manouch Moshayedi said he doesn't have any plans to remove Peterson from the board.
"We don't bring people onto our board because of their educational background," Moshayedi said. "He is a fantastic guy."
The discrepancies were first revealed to Bloomberg News by Barry Minkow, co-founder of the Fraud Discovery Institute, which seeks to profit by looking into executives' backgrounds. Minkow served more than seven years in prison, from 1988 to 1995, after being convicted of fraud while running a company called ZZZZ Best Co. Minkow has said he owns options in STEC and Microsemi that would become more valuable if the shares fall.
"Even though this is not an ax murder by security law standards, if things are as they appear, then I think an enforcement action is appropriate," said James Cox, a professor who specializes in corporate and securities law at Duke University in Durham, North Carolina. He has testified on securities regulation before Congress. "The big deal here is the casualness, if not the cavalier attitude of making statements without the ability to back them up."
Peterson's denial may cause him more problems than any misrepresentation of his degrees, said Jonathan Warner, a lawyer at Warner & Scheuerman in New York. He has 35 years of experience and has represented clients who have lost fraud cases brought by the SEC.
"The only reason a company would put out a press release would be to affect the judgment of investors in the marketplace,” Warner said. “It's one thing to have resume inflation, what's much worse is the brazenness of the public denial when you've been caught out. That shows a degree of arrogance that's scary."
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