Options Scandal Deepens at Broadcom
The SEC charged four current and former Broadcom executives Wednesday with fraudulently backdating stock options from 1998 to 2003 and falsifying documents to support the scheme.
Chairman and CTO Henry Samueli and general counsel David Dull both took leaves of absence from their posts after the charges were made. (See Broadcom Execs Step Aside.)
The other two accused are former CEO Henry Nicholas, who founded Broadcom with Samueli, and former CFO William Ruehle. (See SEC Charges Broadcom Execs.)
John E. Major has been named chairman of the board to replace Samueli.
Neither Samueli nor Dull is leaving the company entirely; in fact, both will remain as non-executive employees who happen to report directly to Broadcom CEO Scott McGregor. Broadcom stresses, though, that the two executives won't be involved in any corporate duties, such as watching over stock options.
The arrangement is similar to that adopted by Marvell Technology Group Ltd. (Nasdaq: MRVL) -- it removed chief operating officer Weili Dai from the executive ranks while keeping her on as an employee. That happened despite an auditor's recommendation that Dai be fired. (See Marvell's Options Drama.)
Broadcom was far from the only company caught in the stock options scandal, but its effect was the biggest. The company reported a $2.2 billion restructuring charge in January 2007, covering restated earnings for the years 1998 to 2005. (See Broadcom's $2.2B Confession.)
Broadcom noted at the time that most of the options went to employees, and none to any CEO during the period in question.
When Broadcom completed its internal audit, Nicholas and Ruehle took quite a bit of the blame -- as did Nancy Tullos, vice president of human relations, who's already settled with the SEC for $1.4 million. (See Broadcom Blame Spreads.)
Samueli got a pass from Broadcom's audit, though, as it concluded he "reasonably relied on management and other professionals" in determining what was or wasn't proper when it came to options grants. The audit committee's results, filed as part of a modified 10-K report with the SEC, didn't mention Dull.
— Craig Matsumoto, West Coast Editor, Light Reading