Broadcom Investigation Uncovers History of Stock Options Backdating
By Colleen Taylor -- EDN, December 18, 2006
Broadcom Corp. has finally wrapped up its audit committee's four-and-a-half month long stock options investigation, confirming that it is guilty of engaging in the now-notorious practice of illegal backdating of stock options.
Broadcom previously announced that the audit committee had determined that the accounting measurement dates for most option grants awarded between June 1998 and May 2003 differ from the measurement dates originally used for such awards—in other words, that the options had been illegally backdated. As a result, the company has said that it expects to pay a compensation expense of at least $1.5 billion.
In a statement released today, the company affirmed that previous announcement, and said the committee has determined that between June 1998 and May 2003, Broadcom's informal option grant procedures and processes "lacked adequate controls," Broadcom said, and that the company's documentation and recordkeeping were insufficient to verify many of the original measurement dates. The committee also concluded that, for option grant dates between November 3, 1998 and May 19, 2003, "certain executives and employees selected numerous grant dates after the fact,"—in short, they participated in illegal backdating. The committee further found that, particularly with respect to several company-wide option grants, allocations of grants to individuals occurred after the grant dates for the total shares awarded had been established.
For the most part, it seems, guilty execs took the money and ran. According to Broadcom, each of the individuals deemed to have been actively responsible for the selection of option grant dates after the fact has either previously left the company for reasons unrelated to the options investigation, or has recently departed Broadcom as a result of the investigation. In addition, acting on the committee's recommendation, the board of directors is canceling outstanding unexercised options granted since Broadcom's initial public offering held by three of the responsible individuals, the company said—the total value of which is more than $37 million.
Meanwhile, execs at the company's top tier remain unscathed. The company has determined that all options and other equity awards granted to the company's founders and all current and former members of the board of directors were properly granted.
Broadcom also previously announced that it received an informal inquiry from the SEC. On December 14, 2006, the company was informed that the SEC has issued a formal order of investigation. Broadcom said it continues to cooperate with the SEC.
The company has faced a delisting threat from the Nasdaq market due to Broadcom's failure to file regulatory Q2 forms on time to the Securities and Exchange Commission (SEC) as a result of the stock options probe. The company came under investigation by the SEC in June after Merrill Lynch identified Broadcom as one of six companies that it noticed had displayed suspicious stock options grants and pricing.
-
WHAT A SHOCKING SURPRISE!!! I never would have believed that these white collar criminals would have been stealin' when they shoulda been buyin'. Good thing they require all of that "ethics training". Read it, and forget it. Keep your ^&*#$@% hands out of the cookie jars, eh?
Op Shun Crook - 2006-18-12 11:22:00 PST
