Vitesse Semiconductor (OTC:VTSS) is facing some shareholder pressure recently after Chapman Capital disclosed a 5.3% stake in the company and demanded that it immediately hold an annual meeting to elect directors to the its board. The activist hedge fund also demanded that Jim Cole, head of the company's chief governance committee, immediately resign amid a series of scandals.

Vitesse has faced some extreme difficulties after being delisted from the Nasdaq Stock Exchange last year. These included an options backdating scandal along with a failure to produce more than two years of audited financial results. In fact, the last time shareholders were even permitted to vote on a slate of directors was nearly 17 months ago on January 24, 2006! Chapman Capital contends that one man stands behind the paper trail that led to this diseaster: Jim Cole.

Robert L. Chapman, Jr. commented, "Having conducted its own investigation of the Compensation Committee that seems to have approved the issuance of backdated stock options to former senior executives of Vitesse, Chapman Capital has followed a trail of circumstantial evidence and now finds itself on the doorstep of 20-year Vitesse director and Compensation/Audit Committees member Jim Cole.  Clearly, we are not alone in forming our opinion, with the majority of callers who spoke on Vitesse’s fourth fiscal quarter conference call referencing Mr. Cole’s prospective resignation from the Board.  Moreover, should the Vitesse Special Committee headed by former Teradyne senior executive Edward Rogas, Jr. have accumulated evidence that exposes Mr. Cole as having committed or been illicitly complicit in any criminal act, Chapman Capital demands that such information be turned over to federal authorities so that Mr. Cole may serve any prison sentence that may be dictated by the laws regulating such professional deportment."

So, where can Vitesse go from here? Well, if Jim Cole is forced to resign, many investors are hoping that the company can put its lackluster history behind it and move forward. The involvement of an activist hedge fund like Chapman Capital also helps the situation by serving as a catalyst for fast change. Once the company is able to rid itself of Mr. Cole and release updated financial statements, it may be able to refile for listing on the Nasdaq. From there, it can begin to rebuild what it once had. It is also worth noting that Chapman Capital had pushed the company towards a sale awhile ago - a strategy that it could resume after these problems have been resolved given the deep value at which the stock is trading. Regardless, this is definitely a stock worth watching over the next couple of months!

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