Legal News

Securities class action against Broadcom greenlighted

By Jonathan Hayter

A federal judge in Los Angeles on Monday reversed his earlier decision and allowed a securities fraud class action to proceed against Broadcom Corp. and its billionaire co-founders, setting up a massive stock options showdown.

Last October, U.S. District Judge Manuel L. Real of the Central District of California had dismissed the same case. Real initially ruled the plaintiffs had not sufficiently alleged that Broadcom's stock price declined as a result of its stock option backdating. That issue, known as "loss causation," has been a vexing problem for plaintiffs around the country as they pursue backdating class actions. In many cases, defense lawyers have argued that backdated stock options were historical problems that did not affect a company's current earnings and thus the market reaction was muted.

The complaint proceeds against Broadcom and the other named defendants including Henry Samueli, co-founder and former chief technology officer; Henry Nicholas, co-founder and former chief executive officer; William J. Ruehle, chief financial officer; and David Dull, former general counsel.

But the judge dismissed claims against Broadcom's outside auditor Ernst & Young, noting that the plaintiffs face "a little bit of a heavier burden" when it comes to proving accountants' "actual knowledge" of a fraud.

Full story on dailyjournal.com.

Full post as published by Legal Pad | LA on February 03, 2009 (boomark / email).