Mixed Samueli Reaction; Some Predict Recovery

There could be life after options for Henry Samueli.

The cofounder, former chairman and ex-technology chief of Broadcom Corp. could end up regaining standing as one of the county’s top businesspeople and philanthropists, observers said last week.

“My feeling is that people are going to say that it was a minor thing,” said Henry Pontell, a criminology professor at the University of California, Irvine, where the engineering school is named for Samueli.

Reaction to Samueli’s plea deal with federal prosecutors last week differed from the indictment earlier this month of Broadcom cofounder and former chief executive Henry “Nick” Nicholas.

Sympathy is more common for Samueli, a brainy, low-key former engineering professor known for big donations to UC Irvine and other causes and for his love of hockey and ownership of the Anaheim Ducks.

Samueli “has done much more good compared to anything that could have happened in court,” said Shalom Elcott, chief executive of the Jewish Federation of Orange County and a personal friend of Henry and Susan Samueli since the early 1980s. “It’s not just the ability to write a check,it’s when you look back at these people’s lives and see what they’ve done here,that’s the measure.”

Martha Stewart

Some draw parallels to Martha Stewart, who was convicted in 2003 of lying to investigators about stock sales. After spending five months in prison in 2004, Stewart was able to resume most of her business dealings with little fallout on her public persona.

For now, Samueli’s image is taking a beating. Last week, he agreed to plead guilty to one felony count of lying to federal investigators about his role in granting stock options at Irvine-based chipmaker Broadcom.

Under the terms of the initial plea deal, he’s set to pay $12.2 million in fines, and, unlike Stewart, avoid prison. He’s likely to see three to five years of probation.

Samueli dodged a bullet, legal experts said.

“This looks like he got an extremely favorable disposition,” said Lawrence Rosenthal, a Chapman University law professor and former federal prosecutor in Chicago. “Either they couldn’t get enough on him or he isn’t a co-schemer.”

Nicholas, who’s charged with several counts of fraud as well as drug charges, faces the prospect of prison.

Prosecutors may have tipped their hand about Samueli in the Nicholas indictment, according to Rosenthal.

“This deal must have been in the works for months,” he said. “The way they wrote the Nicholas indictment,mostly keeping Samueli out of it,that’s the way you’d have written it if Samueli wasn’t a target.”

The Nicholas stock options indictment also charged former finance chief Bill Ruehle for his role in backdating.

The Samueli plea deal doesn’t require him to cooperate with federal prosecutors, another coup for him and his lawyers, according to Rosenthal.

“That’s pretty unusual,” he said. “You want to at least have the option to call on Samueli. I’m frankly surprised they cut him a probation deal without requiring him to testify.”

Paying a Price

While Samueli is seen as getting off easy in what was the nation’s biggest options backdating case, he is paying a price. The plea deal closes a chapter on the most pivotal years of his adult life.

In the run-up to the deal, Samueli stepped down as Broadcom’s chairman and took a leave of absence as chief technology officer. He now serves as an adviser to Chief Executive Scott McGregor.

The Securities and Exchange Commission is seeking to bar Samueli from serving as an officer of a public company. The plea deal, if approved by a judge, would give him room to serve as a technical consultant, according to Broadcom.

And last week, the National Hockey League suspended Samueli as owner of the Ducks, pending his Aug. 18 court appearance on the plea deal, which the judge can accept, amend or reject.

The suspension could be a formality that sees Samueli continue his ownership and involvement later on.

Some observers feel the league had to make a move, even if just a temporary one, after the 2004 conviction of the Rigas family of Adelphia Communications Corp., which had owned the Philadelphia Flyers hockey team.

One local technology executive, who asked not to be identified, said Samueli is getting off lightly.

“The government is going to take its pound of flesh out of Nicholas and Ruehle,” the executive said. “Samueli was complicit. He participated. But he didn’t create it out of whole cloth and drive it at Broadcom. If this was the only punishment that Broadcom got for this, it would be too easy.”

The executive said he’s familiar with a company that competed with Broadcom for workers and was hurt by the options backdating.

“It was unfair competition,” he said. “Broadcom had a significant advantage in recruiting over everyone else. They got the very smartest people by offering under-the-table incentives,it’s like bribing people.”

But even the critical executive said he thinks Samueli may be able to eventually move past the issue.

For now “it’s a blow,” he said. “The fines are irrelevant to him. It’s a personal price to his reputation.”

People who know Samueli say he could return to teaching, take up philanthropy full time and possibly continue with the Ducks and his company that runs Honda Center in Anaheim.

While Samueli may be barred from holding posts at public companies, he could look to buy or run a private startup or do research, they say.

“Billionaires will always have something to do,” the tech executive said.