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SEC charges former Broadcom executives with backdating

SEC charges former Broadcom executives with backdating

The SEC chargest four current or former Broadcom officers with stock options backdating

The US Securities and Exchange Commission has charged two current and two former officers of semiconductor vendor Broadcom for their alleged participation in a supposed five-year scheme to backdate stock options granted to almost all of the company's employees.

The SEC's complaint, filed this week in US District Court for the Central District of California, alleges that Broadcom's current Chairman and Chief Technology Officer Henry Samueli, current General Counsel David Dull, former CEO Henry Nicholas and former Chief Financial Officer William Ruehle participated in a scheme lasting from 1998 to 2003 to fraudulently backdate stock option grants, resulting in the company failing to record billions of dollars in compensation expenses.

The complaint also accuses the four men of falsifying documents to cover up the backdating, the SEC said.

Two Broadcom spokespeople weren't immediately available for comment.

Broadcom restated its financial results in January 2007 and reported more than US$2 billion in additional compensation expenses. The SEC has brought backdating charges against several tech vendors in recent years.

The Broadcom executives "perpetrated a massive, five-year scheme that involved fraudulent backdating of dozens of option grants, falsifying corporate records, intentionally false accounting, and lying to shareholders," Linda Chatman Thomsen, director of the SEC's Division of Enforcement, said in a statement. "This egregious misconduct resulted in the largest accounting restatement to date arising from stock option backdating and warrants the significant sanctions sought from these individuals."

The four executives made it appear that the options were granted at times when Broadcom's stock was selling for low prices, although the options weren't granted at those times, the SEC said.

Nicholas and Samueli served on the two-member option committee that had authority to approve options to employees and all but the most senior officers, the SEC said. The option committee approved up to 88 grants during the time period in question, but in many cases, the committee didn't hold meetings or make decisions on the dates the grants were supposedly approved, the SEC said.

Instead, Ruehle allegedly selected most of the grant dates retroactively based on a comparison of Broadcom's historical stock prices, and Nicholas and Samueli allegedly concealed the backdating by signing false committee written consents stating that the grant had been approved by the retroactive date, the SEC alleged.


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