Legal News

SEC Sues Broadcom Founder, Others, Over Alleged Backdating

By Ashby Jones

Though the stock-options backdating scandal is well into Year Three, it’s still making headlines. The latest: the SEC has charged Broadcom founder and former CEO Henry Nicholas III of participating in a scheme to backdate employee stock-option grants between 1998 and 2003. Three other men were named in the suit: current chairman Henry Samueli, current general counsel David Dull, and former CFO William Ruehle. Here are stories from the WSJ and the Orange County Register, which is also reporting that Samueli has resigned.

The news may not have come as a huge surprise to Broadcom execs as word of Broadcom’s backdating troubles have been out and about for a while. In January 2007 the company restated its results to include more than $2 billion in additional compensation expenses because of stock-options issues; the company last month agreed to pay $12 million to settle civil charges brought by the SEC, without admitting or denying guilt.

The breakdown of the charges: Nicholas, who left the company in 2003, and Samueli played a key role in approving option grants. Ruehle selected grant dates retroactively, and Nicholas and Samueli helped conceal the backdating, the SEC charged. The SEC is seeking fines and the return of ill-gotten gains, as well as to bar the four from serving as corporate officers.

Susan Szabo, an attorney for Mr. Nicholas, declined to comment. Samueli’s lawyer, Gordon Greenberg, said his client was “fully exonerated” by an internal Broadcom investigation. Richard Marmaro, Ruehle’s attorney, denied the accusations. Seth Aronson, a lawyer for Dull, said the SEC’s settlement with Broadcom precludes the company’s general counsel from commenting on the allegations.

Hardly a Broadcom story is complete without some jaw-dropping tale about Henry Nicholas. So we bring you this fun OC Weekly piece from 2004. The story opens with the writer describing his meeting with Nicholas:

After a few hours, my eyes glazed over, but Henry T. Nicholas III had only begun to talk. . . . Henry T. Nicholas III—who told me when we met just after lunch that I could call him “Nick,” although I never really got the chance—still had a few more things to say, something about a mathematical equation called the Golden Ratio, then something about fatherhood, then about the invention of the electric guitar, the Air Force Academy, running 10Ks at 3 in the morning, revolutionizing the educational system, cursing at Christmas parties, the UC Irvine crew team, Korn, about whether time-with-a-capital-T is concave or convex. Night had fallen by the time he got it all out—seven hours and 49 minutes later. . . .

Photo: AP

Full post as published by Law Blog - WSJ.com on May 15, 2008 (boomark / email).