NEW YORK (Bloomberg) — Bermuda-based Marvell Technology Group Ltd., the maker of chips for Apple Inc.'s iPod media player, will pay $10 million to settle US Securities and Exchange Commission claims it improperly backdated stock-option grants for employees.

Marvell misled investors by not reporting compensation expenses for options granted at below-market prices from 2000 through 2006, the Washington-based SEC said. The backdating let Hamilton, Bermuda-based Marvell overstate income by $362 million in that period, the SEC said in a suit filed and settled today at federal court in San Jose, California.

This is a "tone at the top case," Catherine Whiting, an SEC lawyer in San Francisco, said in an interview. Marvell co-founder and former chief operating officer Weili Dai was "backdating and signing false minutes routinely, over the course of three years from 2001 to 2004," Whiting said. "The documents she was signing were minutes of meetings that she didn't attend — she knew it was false and she did it over and over."

In backdating, companies retroactively change grant dates to periods when share prices were lower, boosting recipients' profits while potentially distorting earnings. At least 225 companies have disclosed internal or federal investigations involving options irregularities, and more than 140 said they will restate financial results.

Dai, acting as Marvell's stock option committee, routinely reviewed Marvell's past performance and picked dates with low stock prices, the regulator said. Dai signed the falsified minutes attesting to meetings of the committee to make it seem Marvell had granted options on those dates, the SEC said.

Dai, 46, of Los Altos Hills, California, co-founded the company in 1995 with husband Sehat Sutardja. She will pay $500,000 in penalties and agreed to not serve as an officer or director for five years, Whiting said. Both Dai and the company agreed to settle without admitting or denying wrongdoing.

"Marvell and Ms. Dai are very pleased that this chapter is closed and are focused on moving forward," Marvell spokeswoman Louise Kehoe said in an interview. Dai moved from chief operating officer to director of strategic marketing and business development in May 2007, Kehoe said. The switch was related to issues with options backdating, she said.

According to the SEC complaint, Dai used a list of historic stock prices since the last stock option grant and used a price when the stock was trading at or near the lowest price to pick dates for new grants. Under "well-settled" accounting rules the company was required to record an expense for options granted with an exercise price below the market price. Marvell issued "in the money" options without recording an expense, and backdated the grants to make it appears as if the options had been granted "at the money" on an earlier date — a violation of federal securities laws, according to the complaint.