Broadcom options backdating indictment
May 14: The SEC files a civil complaint accusing Samueli, Nicholas, former Chief Financial Officer William Ruehle and General Counsel David Dull of fraudulently backdating options.
Samueli steps aside as chairman and chief technical officer pending resolution of the complaint.
Samueli, who also owns the National Hockey League’s Anaheim Ducks, has denied any wrongdoing. He occasionally scowled as his lawyers and prosecutors argued over whether he should be held without bail as a flight risk and a threat to the community. Nakazato ordered that Nicholas be confined to a Malibu drug treatment facility, with electronic monitoring, and that his two private planes be disabled.
Nicholas, who stepped down as Broadcom’s chief executive in 2003, surrendered Thursday morning to the FBI. Ruehle, 66, Broadcom’s former chief financial officer, were accused of backdating millions of stock options for five years to improperly reward employees. Nicholas will contest these charges vigorously,” his lead attorney, Brendan V. He warned Nicholas that he would be arrested if he violated any terms of his release, which also stipulate random drug tests.
In January, the former CEO of Brocade Communication Systems was sentenced [JURIST report] to 21 months in prison and fined million for the improper backdating of stock options.
In October 2007, Mercury Interactive settled [JURIST report] a similar case for a record 7.5 million.
Samueli and Dull were not named in the indictment unsealed Thursday, although the government could still seek to charge them later.
According to the indictment [PDF text] unsealed in federal court Thursday, firm co-founder Henry T. Ruehle engaged in a "conspiracy to disguise, conceal, understate, and mischaracterize compensation expenses Broadcom was required to recognize in connection with its stock options." Nicholas was also indicted separately on drug charges [indictment, PDF]. The practice of backdating involves setting an option-holder's stock price at a day when stock prices were low instead of the price on the day the option was granted.
Stock options were routinely used to recruit or retain employees during the high-tech boom of the late 1990s. After internal discussion that involved Ruehle and others, Nicholas and Samueli in July 1999 “signed Broadcom corporate records fraudulently reflecting” the earlier date, the indictment alleges.
The indictment details one such arrangement, when Nicholas in June 1999 hired an engineer identified in the indictment by his initials, M. It was a move that would come back to bite them, according to the indictment.
A second, four-count indictment names only Nicholas, 48, and alleges that he maintained homes and commercial properties in Orange County and Las Vegas for the “purpose of using and distributing controlled substances,” including cocaine and methamphetamine. the drinks of technology executives and representatives who worked for Broadcom’s customers,” the indictment alleged. He and Ruehle, who also appeared in court Thursday and was freed on a -million bond, are to be arraigned June 16. discovered that the grant date had been recorded as May 28, which diminished their value.
Among other things, Nicholas allegedly supplied Broadcom customers with prostitutes and narcotics he sometimes referred to as “party favors.” He is accused of slipping drugs into some of their drinks.“Defendant Nicholas spiked the drinks of others with MDMA (ecstasy) without their knowledge, including . The indictment that names both men details a conspiracy to backdate stock options to make them worth more to employees without having to report the expense to shareholders.-- An expensive fix To correct its books, Broadcom last year recorded .2 billion in previously unreported expenses -- the biggest such adjustment among the more than 200 firms whose options practices have come under scrutiny.“By fraudulently backdating and repricing option grants, defendants and their co-conspirators deceived Broadcom’s shareholders, potential shareholders and auditors as to the nature and amount Broadcom truly was compensating its employees and officers,” the indictment alleged. that the 120,000 options he was to get would be backdated to May 25 of that year, increasing their value. He demanded that the date be changed to the more favorable one he’d agreed upon with Nicholas.
Learn more about the trial of Slobodan Milosevic and the charges filed against him from the BBC.