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Scandal harms Avant stock

The software maker's stock free-falls as much as 49 percent on news of charges that top executives conspired and stole trade secrets.

Software maker Avant (AVNT) saw its stock plummet 49 percent after charges that the company and its top executives conspired and stole trade secrets from Cadence Design (CDN).

Shares of Avant fell to 12-1/2 at the market's close, down 12 from yesterday.

Felony charges were filed late last week in Santa Clara County, California, against Avant's chairman, president, and chief executive Gerald Hsu, director Yull-Chung "Eric" Cho, technology vice president Yuh-Zen Liao, engineering vice president Steven Tzyh-Li Wuu, director of business operations Shiao-Li Huang, and engineer Chih-Liang "Eric" Cheng. All the defendants had at one time worked at Cadence.

Also named in the complaint was former Cadence employee Mitsuru "Mitch" Igusa, who in 1995 was charged with a similar complaint regarding Cadence trade secrets. Igusa, who was never a full-time Avant employee, allegedly emailed Cadence software files to his home and had once served as a consultant to Avant. Igusa is awaiting trial on these earlier charges.

In 1994, Cadence alerted the Santa Clara district attorney regarding Igusa, said Cadence spokesman Mike Sottak. County authorities later raided Igusa's home and filed charges for unauthorized possesion of Cadence software.

Authorities then raided Avant's headquarters in 1995. The defendants are scheduled to be arraigned on Friday and, if convicted, could face up to seven years in state prison.

Cadence, meanwhile, has a civil case pending. The software maker sought an injuction in 1995 to halt Avant's selling of the software, which is one of its main product lines, Sottak said.

Last month, the U.S. District Court Judge Ronald Whyte ruled that Avant had copied Cadence's source code but did not issue a preliminary injunction, citing that he had not seen Avant's revised software. Cadence has appealed the decision on the preliminary injuction ruling, Sottak said.

Neither Avant nor the district attorney's office could not be reached late last night.

But in a statement, Avant said it is confident the company and its employees will "prevail in a court of law."

CEO Hsu said: "These charges are unfounded. The district attorney's office has been misled and misinformed. We have faith in the legal system and confidently look forward to exoneration."

Hsu also noted the company plans to continue to sell and support the technology on which the case focuses.

Trade secret cases are nothing new to Silicon Valley.

Borland International announced in February that it settled a trade secret lawsuit against Symantec.

The civil case had stemmed from allegations that a former Borland executive, Eugene Wang, had divulged trade secrets when he went to Symantec.

Criminal charges had been filed by the Santa Cruz County district attorney in 1993 against Wang and Symantec's chief executive Gordon Eubanks, but those charges were dismissed in November.

Also, in March, Informix (IFMX) went after rival database software maker Oracle (ORCL).

Informix filed suit in Portland, Oregon, in January after 11 software engineers left jumped ship to Oracle. Informix was able to receive a temporary restraining order that bars its former employees from divulging trade secrets and prevents Oracle from trying to recruit other Informix employees. The temporary restraining order remains in effect pending a May 12 hearing.