Former and present Broadcom Corp. executives, including cofounders Henry Samueli and Henry Nicholas, were sued by the Securities and Exchange Commission Wednesday over stock options backdating at the Irvine chipmaker.
The SEC filed a civil complaint against cofounder and former chief executive Henry Nicholas and cofounder and current chairman and chief technology officer, Henry Samueli.
Also cited were former chief financial officer William Ruehle and current general counsel David Dull.
The complaint alleges that the four engaged in “a scheme from 1998 to 2003 to fraudulently backdate stock option grants and for failing to record billions of dollars of compensation expenses and falsifying documents.”
“The executives at Broadcom 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,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement, in a statement.
The SEC is charging Nicholas, Samueli, Ruehle and Dull with “violating or aiding violations of anti-fraud, record-keeping, financial reporting and internal controls provisions of federal securities laws.”
It’s set to seek fines and to bar the executives from sitting on the board. Of the four, only Samueli is a Broadcom director.
The SEC alleged Ruehle and Dull “personally benefited from the backdating scheme” to the tune of more than $100,000 for Ruehle and $1.8 million for Dull.
The agency is seeking repayment of “ill-gotten gains” from Dull and Ruehle and the repayment of bonuses and profits from stock sales by Nicholas and Reuhle.
A spokesman for Samueli said Broadcom’s own internal investigation into options backdating found some passive involvement but no wrongdoing by Samueli.
The company probe laid most of the blame with Nicholas and Ruehle.
Samueli’s lawyer Gordon Greenberg said the SEC is “trying the case in the media” and noted that the SEC “failed to say that Samueli has no accounting training and was never responsible for the processing or accounting of stock options,” according to a statement.
The suits aren’t surprising, given that Broadcom took the biggest restatement charges of any company being investigated for stock options.
In early 2007 the company took charges of more than $2 billion to past earnings to fix misdated options.
In April, Broadcom agreed to pay $12 million to settle similar SEC charges without admitting or denying the allegations.
“This is a major step in the process of closing this chapter as we remain focused on the company’s business today and for the future,” the company said in a statement at the time.
Earlier this year, former human resources executive Nancy Tullos agreed to a criminal plea bargain with federal prosecutors.
In March, she also agreed to pay more than $1.3 million in a separate SEC lawsuit.
A criminal investigation of Nicholas, Samueli, Ruehle and Dull is ongoing.
Wall Street seemed to shake off the news.
Shares of Broadcom were up nearly 2% in afterhours New York trading on a recent market value of about $14 billion.