Cypress Semiconductor ( CY) and its CEO T.J. Rodgers have long been controversial. Revelations the firm owns a stake in two hedge funds raise yet another red flag in Cypress' checkered history.The chipmaker revealed its unusual investment in a footnote buried within its annual report, filed earlier this month. Notably, Cypress only revealed its investment -- ongoing since at least 2002 -- because gains in one of the hedge funds amounted to a material portion of Cypress' 2003 pretax income. Adding to the drama, one of Cypress' hedge fund investments held short positions in five semiconductor equipment makers, including Applied Materials ( AMAT) and Novellus Systems ( NVLS). The revelations raise questions about what Cypress is doing with shareholders' cash and the transparency of its investments, said Todd Fernandez, a senior research associate at San Francisco-based Glass Lewis. "Those are shareholder funds. They should either be reinvested in the business or dividended back to shareholders," Fernandez said. Others were even more critical. Gary Lutin, an investment banker and shareholder rights advocate, likened Cypress' investments in the hedge funds to the company using shareholder funds to make a bet at the race track. "That is not what people contribute capital to a corporation for," Lutin said. Cypress spokesman Joe McCarthy declined to respond to the criticism or answer specific questions about the company's hedge fund investments. "Like any company, we make certain investments. This one was approved by our board of directors," McCarthy said. Cypress' board has approved some controversial practices in the past, and these investments will be news to most investors. Aside from those in the company's most recent annual report, no other mentions of "hedge fund" or "limited liability partnership" or "Digital Century Capital" -- the name of one of the funds -- turned up in a search of the chipmaker's regulatory filings going back to 1986.