Irvine-based chipmaker Broadcom Corp. said Monday it has finished its look into backdated options and will restate nearly five years of earnings at a cost of $1.5 billion.
The company also said Monday a formal investigation of its option grants is under way by the Securities and Exchange Commission.
Broadcom had been cooperating with an informal inquiry and will continue to work with regulators, the company said.
A special board of directors committee has been reviewing 6 million pages of documentation since September as one of hundreds of companies caught up in backdating of stock options. Others in Orange County include Santa Ana-based First American Corp. and Lake Forest-based Western Digital Corp.
Broadcom said Monday that its board also will cancel unexercised options valued at more than $37 million awarded to three former executives who were involved in backdating.
All of the people involved have left the company, some as a direct result of the investigation. They include former chief financial officer Bill Ruehle.
“Broadcom is fully committed to compliance with all applicable accounting standards and regulations,” Chief Executive Scott McGregor. “The rigor with which the company has addressed this issue once it was discovered is testimony to our commitment.”
Sarbanes-Oxley rules, enacted in 2002 in the wake of corporate scandals, forced companies to reveal any options that are back-dated to a low trading point. Backdating awards grantees a paper profit but can violate tax and disclosure rules.
Broadcom can now focus on finalizing its past two quarterly reports, which will reflect the backdating charges.
Nasdaq had threatened to delist the company for failing to file complete reports but agreed last month to allow trading to continue. The exchange expects an update by Jan. 7 and the full quarterly reports completed by Jan. 31.
