Broadcom co-founder Samueli admits lying to SEC

Samueli has waived his rights to an appeal and avoided jail time for his participation in the backdating of stock options granted to Broadcom executives and employees.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 6/24/2008

Broadcom Corp co-founder and former CTO Henry Samueli has entered a guilty plea and admitted to making materially false statements to the SEC (Securities and Exchange Commission) in the company’s criminal stock-option backdating case.

In doing so, Samueli (pictured) has waived his rights to an appeal and has most likely avoided jail time for his participation in the backdating of stock options granted to Broadcom executives and employees, according to the plea agreement filed with the US District Court for the Central District of California, Southern Division, Monday.

Federal prosecutors have recommended Samueli serve five years of probation and pay more than $12.2 million in fines, according to the agreement.

The agreement states that Samueli lied to the SEC in a May 25, 2007 deposition when he said he was not directly involved with the company’s history of stock-option backdating. Cited as evidence in the filing is a January 3, 2002 e-mail from Nancy M Tullos, Broadcom’s former VP of human resources, questioning what date to grant option prices at. Samueli’s reply to the e-mail suggests an alternate date to the actual grant date.

Copied on the e-mail are former Broadcom CFO Bill Ruehle and general counsel David Dull. The SEC in May charged Samueli, Ruehle, Dull, and Henry T Nicholas, Samueli’s partner in founding Broadcom in 1991, for their alleged participation in a “five-year systematic scheme to secretly backdate stock options granted to virtually all Broadcom officers and employees.”

On the SEC complaint, Samueli and Dull took leaves of absences from their Broadcom posts. Samueli also resigned as chairman of the Irvine, Calif-based communications chip maker.

Ruehle and Nicholas last week pleaded not guilty to the securities fraud indictment against them. Nicholas was also separately indicted for drug use and distribution.

Tullos was also named in the May SEC compliant. Tullos in March agreed to a more than $1.3 million SEC settlement without admitting or denying guilt. Earlier this year, she plead to obstruction of justice in the Broadcom stock-option investigation.

Based on findings in the investigation, Broadcom in January 2007 restated its financial results and reported an additional $2.22 billion in compensation expenses, the largest restatement to date from stock-option backdating. Additionally, Broadcom in April agreed to pay $12 million to settle SEC charges that it falsified reported income by backdating stock-option grants over a five-year period starting in 1998.

Samueli’s court date is set for August 18.