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Cal Micro Execs Convicted of Fraud

July 16, 1998

SAN FRANCISCO (AP) _ Two former California Micro Devices executives were convicted Wednesday of securities fraud in connection with a stock collapse that cost shareholders more than $100 million.

Chan Desaigoudar, former chairman and chief executive officer, and Steven J. Henke, former vice president, treasurer and chief financial officer, were each convicted of six felony charges of fraud, making false statements to the Securities and Exchange Commission and insider trading.

Each faces a prison sentence of 12 to 13 years under federal guidelines, said Assistant U.S. Attorney Robert Crowe. Sentencing is scheduled for Oct. 13 before U.S. District Judge Vaughn Walker.

Two other former company executives, Surendra Gupta, a former president, and Ronald Romito, former chief accounting officer, pleaded guilty to related charges and testified against their ex-colleagues.

Cal Micro, based in Milpitas, makes electronic components for silicon chips. Its stock plunged after reports emerged of accounting irregularities and overstated revenues.

The company is now operating under new management.

The executives were charged with plotting to raise Cal Micro’s stock price in preparation for a secondary public stock offering by claiming revenues from nonexistent sales. Prosecutors said false invoices were issued, false reports were filed with the SEC, and false statements were made in a press release.

The jury found that both Desaigoudar and Henke had conspired to make false statements to the SEC in 1994, but rejected an allegation that they also conspired to inflate the stock price and falsify revenue figures. Henke was also acquitted of one of two counts of insider trading.

Under the law, Crowe told reporters, both men can be sentenced for the entire loss to shareholders, which the prosecutor estimated at $139 million.

The executives will appeal if Walker denies a new trial, said Frank Ubhaus, Desaigoudar’s lawyer. He said his client’s position was that ``he did not know what the people below him were doing.″

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