Shares of Irvine’s Broadcom Corp. rose Friday on good earnings that overshadowed word that Chairman Henry Samueli and departed cofounder Henry Nicholas were formally cited in a federal plea bargain over misdated stock options at the Irvine chipmaker.
Investors seemed to shake off the news, which marked the first time Nicholas and Samueli were named in court proceedings over what federal prosecutors allege was the illegal falsifying of options at Broadcom.
Broadcom’s stock was up nearly 5% in midday New York trading on Friday with a market value of $13 billion.
The chipmaker had better-than-expected fourth-quarter results on Thursday that sent the stock soaring more than 13% in afterhours trading last night.
Broadcom posted revenue of $1 billion, up 11% from the year-ago quarter and beating analysts’ expectations.
Excluding charges for stock compensation, research and development, acquisitions and other items, Broadcom saw profits of $201 million, up 9% from $185 million a year ago and beating analysts’ expected $173 million.
Including the charges, the chipmaker reported profits of $90 million, double the $45 million it saw during the same period a year earlier.
Hours after the earnings, word came in an Associated Press story that federal prosecutors cited the company’s founders as “unindicted potential co-conspirators” in a plea deal struck last year with former Broadcom human resources executive Nancy Tullos.
Tullos pleaded guilty to one count of obstruction of justice in the stock options probe. Tullos, who left the company in 2003, agreed to the plea in exchange for her cooperation in the case.
U.S. District Judge Cormac J. Carney ordered the releasing of the executives’ names, who originally were identified as “Executive A” and “Executive B” in the plea agreement.
The citing means that prosecutors are alleging possible involvement in backdating by Nicholas, who left the company in 2003, and Samueli, currently chairman and chief technology officer.
It could mean one or both may be indicted or be sought as a witness. Sometimes prosecutors cite unindicted co-conspirators they believe are involved but don’t have enough evidence to indict them.
Other times they’re cited when they don’t cooperate with investigators, which could be the case with Nicholas and Samueli.
So far, the investigation has touched on Samueli but has focused more on Nicholas, who has been at the heart of a probe by the U.S. Attorney’s Office in Santa Ana since last year.
The investigation has taken salacious turns, unearthing allegations of drug use and other unseemly behavior by Nicholas.
Broadcom’s own internal investigation on options backdating last year said Nicholas bore “significant responsibility.”
The report also laid blame with former chief financial officer Bill Ruehle, who stepped down in 2006.
The company cited Nicholas and other former executives for a lack of controls and inappropriate grant practices. Nicholas was involved in the mistiming of some grants but didn’t personally benefit from any of them, according to the report.
Samueli served on the board committee that granted and issued stock options with Nicholas.
But Broadcom’s report didn’t lay blame with Samueli, saying he “reasonably relied on management and other professionals.”
Broadcom said last year that it would revise financial statements for 1998 to 2005 with charges of $2.2 billion to stock option grants that weren’t properly accounted for.
