Broadcom options backdating indictment
Last month, the SEC filed a civil action against Samueli and three other current and former Broadcom executives, alleging that they schemed from 1998 to 2003 to secretly .
The backdating forced the company to eventually restate its financial results and report more than billion in extra compensation expenses, the SEC said.
The defense attorney continued: “At all times, Bill acted in good faith and believed Broadcom’s financial statements were accurate … The government’s indictment unsuccessfully attempts to transform a company’s technical accounting error into criminal conduct.
The indictment asserts that to notch a win, Ruehle and others made false statements to Ernst & Young, including telling the auditor that Broadcom’s options committee authorized the market value of the options, the distribution of the millions of options, and focal plan and matrix formula.The SEC previously brought enforcement action against Broadcom and Tullos in connection with the option backdating scheme.The former CFO and CEO of Broadcom Corporation have been indicted by a federal grand jury in California on securities fraud and conspiracy charges related to backdating stock options that caused the company to take a .2 billion write-down in 2007.Nicholas and the company's former chief financial officer, William Ruehle, face civil claims and have been indicted on criminal charges related to backdating.A separate indictment charged Nicholas with keeping a stash of illegal drugs at his homes and at a warehouse that he used to spike the drinks of industry executives and Broadcom customers at parties.According to the court documents, the engineer took the deal.The indictment also contained a tale of desperation during a time when Broadcom’s stock was tumbling and options were no longer an incentive to retain key employees.In addition, the market value of the grants and change to the distribution program needed to be vetted and approved by the board’s options committee to garner favorable accounting treatment.During the summer of 2000, Ernst & Young expressed concerns to Broadcom’s management that the first round of focal grants, issued on May 26, 2000, were not handled properly because there was no evidence that the options committee approved the market value of the options price, authorized millions of options grants at that price, or okayed the change to the compensation system.As a result, Ruehle and Nicholas allegedly orchestrated “top up” schemes, while Nicholas called for a “double up and cancel” scheme.The top up grants were a way to breathe life back into worthless options — so-called underwater options— by giving them a more favorable strike price.