The Securities and Exchange Commission has charged the former CEO and CFO of Broadcom with stock options backdating, along with the chip maker’s chairman and general counsel.
The SEC said they were involved in a scheme between 1998 and 2003 to fraudulently backdate stock option grants, failing to record billions of dollars in compensation expenses, and falsifying documents. Broadcom restated its financial results in January 2007, reporting more than $2 billion in additional compensation expenses.
The SEC complaint names former Broadcom CEO Henry T. Nicholas, former CFO William J. Ruehle, chairman and chief technology officer Henry Samueli, and general counsel David Dull. Ruehle and Samueli are now on a leave of absence.
According to the complaint, Nicholas and Samueli served on a two-member option committee that had the authority to approve options to all but the most senior officers. The SEC alleges that the option committee approved as many as 88 grants during the relevant period, but for many of the grants the committee neither held meetings nor made decisions on the dates the grants were supposedly approved. The SEC also alleged that Ruehle and Dull each benefited from the backdating scheme by receiving and exercising backdated grants that were in-the-money by more than $100,000 for Ruehle and $1.8 million for Dull.
Broadcom announced that Samueli and Dull have each taken leaves of absence pending resolution of the SEC civil complaint. Samueli also resigned from the board and the chairmanship pending resolution of the complaint. Broadcom instead named John E. Major as non-executive chairman of the board.
"In mid-2003 the company significantly strengthened its equity award practices, putting into place rigorous processes for equity awards,” Major said in a statement. “We believe that the company's current practices are among the best anywhere.”
Last month, Broadcom entered into a settlement with the SEC. Without admitting or denying the SEC's allegations, Broadcom agreed to pay a civil penalty of $12 million.
