Ex-Broadcom exec charged with stock-option backdating

By Suzanne Deffree, Managing Editor, News -- 3/5/2008

The Securities and Exchange Commission (SEC) has charged Nancy M. Tullos, Broadcom Corp’s www.broadcom.com former VP of human resources, with participating in a five-year stock-options backdating scheme at the communications giant.

Under a settlement announced Tuesday, Tullos has agreed to pay more than $1.3 million in disgorgement and prejudgment interest. She further agreed to pay a civil penalty of $100,000.

"Ms. Tullos personally benefited from the stock-option-backdating scheme that she facilitated in her role as head of Broadcom's human resources department," said Rosalind R. Tyson, acting regional director of the SEC's Los Angeles regional office, in a statement. "The Commission will continue to aggressively pursue actions against individuals such as Ms. Tullos who engage in fraudulent options practices that mislead investors."

Tullos, who earlier this year plead to obstruction of justice in the Broadcom stock-option investigation, agreed to the SEC settlement without admitting or denying the allegations in the complaint.

According to the SEC, Tullos from 1998 to 2003 communicated false grant dates within Broadcom and provided spreadsheets of stock-option allocations for the backdated grants to the company’s finance and shareholder services departments, knowing that they would use the information for Broadcom's books, records, and periodic filings with the SEC. Tullos personally benefited from the backdating scheme, the SEC said, because she received and exercised backdated stock options that were in-the-money by more than $1.2 million.

As part of the settlement, Tullos will be enjoined from violations of an antifraud provision as well as aiding and abetting violations of the reporting and recordkeeping provisions of the federal securities laws.

Broadcom, too, has paid for its questionable stock-option activity. The company 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.

The SEC said that its investigation in stock-option backdating is continuing.

For more on the high-tech industry’s backdating investigation, see “Taking stock: The unfolding stock-option investigation.”

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