Post a CommentBroadcom to pay $12M to settle SEC suit
Broadcom also reported revenue for Q1 of $1.032 billion, an increase of 0.5% compared with the $1.027 billion reported in Q4 2007 and an increase of 14.5% over Q1 2007.
By Ann Steffora Mutschler, Senior Editor -- Electronic News, 4/23/2008
Communications chipmaker Broadcom Corp has agreed to pay $12 million to settle the suit brought by the Securities and Exchange Commission (SEC) over charges that it falsified reported income by backdating stock-option grants over a five-year period.
Broadcom restated its financial results in January 2007, which included the reporting of more than $2 billion in additional compensation expenses, one of the largest restatements to result from the stock-option backdating debacle, according to a statement by the SEC.
"The backdating scheme at Broadcom went on for five years, involved dozens of option grants, and resulted in the largest accounting restatement to date arising from stock option backdating. The scope and magnitude of the fraud warrants the significant penalty imposed on the company," said Linda Chatman Thomsen, director of the SEC's division of enforcement, in the statement.
As part of this action, federal prosecutors in Los Angeles are said to be considering criminal charges against former and current company officials, who would join former Broadcom human resources executive Nancy Tullos who pleaded guilty to one count of obstructing justice.
In March, Tullos paid a fine to settle SEC civil charges, without admitting or denying the allegations. In January, Broadcom founders Henry T. Nicholas III and Henry Samueli were named as “unindicted potential co-conspirators” by federal prosecutors in an investigation into the communication company’s backdating of stock options.
During a conference call with financial analysts for its Q1 results, Broadcom president and CEO Scott McGregor said, “We are pleased to announce that earlier today the SEC’s investigation into Broadcom’s historical stock option granting and accounting practices has concluded with respect to the company.”
According to the SEC’s civil lawsuit, filed in US District Court in Los Angeles, Broadcom misrepresented the dates of as many as 88 stock-option grants to executives and employees over a five-year period from June 1998 to May 2004. Further, SEC officials said the options were "secretly" backdated to dates when Broadcom's stock was trading at a lower price, potentially making the options more valuable.
"In agreeing to settle and resolve this matter, the company did not admit or deny the SEC's allegations, and the company also agreed that it would not make or permit public comment on the allegations made in the SEC's complaint. Accordingly, neither the company nor any individuals affiliated with us will comment further," Broadcom spokesman Bill Blanning reiterated.
Separately, Broadcom announced revenue for Q1 of $1.032 billion, an increase of 0.5% compared with the $1.027 billion reported Q4 2007 and an increase of 14.5% compared with the $901.5 million reported for Q1 2007.
“While we remain cautious on the macroeconomic front, based on strong ordering trends from our customers throughout the first quarter, we expect solid revenue growth for the second quarter within each of our three major target markets,” McGregor said.
