The results, covering fiscal years 1998 through 2005, turned out to be wider-reaching than Broadcom anticipated in July, when it predicted restatements of $750 million going back to 2000. (See Broadcom to Restate Earnings.)
Most of the affected options were apparently held by Broadcom's rank-and-file. Broadcom says none of its CEOs during that span benefited from back-dated options, nor did any directors nor the two founders, Henry Nicholas and Henry Samueli.
Still, Nicholas was part of the back-dating problem, Broadcom admits. A revised 10-K form filed with the Securities and Exchange Commission (SEC) yesterday names names:
- Nicholas "bears significant responsibility for the lack of adequate controls in the option granting process due to the tone and style of doing business he set," the document says. Nicholas left the company in 2003, reportedly for family reasons. (See Big Day at Broadcom.)
- CFO William Ruehle "was at the center of the flawed option granting process," the 10-K says, adding that he participated in selecting grant dates and "failed to provide proper advice concerning proper accounting standards or to establish proper procedures." Ruehle retired in September. (See Broadcom CFO Retires.)
- Nancy Tullos, the vice president of human resources from August 1998 to June 2003, "was heavily involved in the flawed option granting process." She might not have assigned dates herself, but she "was fully aware of what was occurring, and encouraged, assisted in, and enabled it," the 10-K says.
Some of Ruehle's outstanding options, and all of Tullos's, have been terminated, Broadcom says. The net value of their terminated options, prior to any repricing, was, respectively, $32 million and $4 million, the 10-K states.
Nicholas had no options outstanding.
Last month, Broadcom filed an SEC statement saying three current executives' options were being affected by the investigation, although the numbers were relatively small. (See Options Antics.)
Even with back-dating, many of the earlier Broadcom options probably sank underwater after 2001, as the company slid from its peak. In yesterday's press release, CEO Scott McGregor noted that "less than a third of the total charges taken relate to options that were actually exercised by employees or remain outstanding today."
Broadcom shares were up $1.08 (3.7%) at $30.54 midday.
— Craig Matsumoto, West Coast Editor, Light Reading