After a remarkable win last week, there’s one bit of unfinished legal business for Broadcom Corp. cofounder and technology adviser Henry Samueli.
He still faces a Securities and Exchange Commission lawsuit that’s been on hold pending the resolution of his criminal case and those of cofounder Henry “Nick” Nicholas and former financial chief Bill Ruehle.
The suit seeks a number of penalties, including barring Samueli, Nicholas, Ruehle and former general counsel David Dull from serving as officers at a public company.
Last week’s stunning criminal exoneration of Samueli stands to impact the litigation, said Michael Piazza, head of securities litigation at Greenberg Traurig LLP’s Irvine office.
“The SEC will have to look closely at its allegations against Samueli and the extent they are relying on those to make a case against the other individuals,” he said. “The judge clearly called into question whether Samueli did anything wrong at all.”
Last week, U.S. District Court Judge Cormac Carney threw out one felony charge against Samueli as well as a plea deal he struck with prosecutors. The move came after two days of testimony by Samueli in the criminal trial of former financial chief Ruehle.
In 2008, Samueli pleaded guilty to making a false statement to SEC investigators about his role in granting backdated options at Irvine chipmaker Broadcom.
The deal called for probation and fines but no jail time.
The judge’s move likely clears Samueli from further criminal charges in the options case.
‘Unprecedented’
Many in the local legal community called Carney’s move “extraordinary” and “unprecedented.”
“It was a watershed day, and not just for Mr. Samueli,” said Lawrence Rosenthal, a professor at Chapman University School of Law in Orange.
In an interesting twist, Judge Carney is set to preside over the SEC’s suit as well.
The suit was put on hold in August 2008 pending the criminal cases of Ruehle, Nicholas and Samueli. Nicholas is set to go on trial on options charges in February.
“I assume that the court will wait to lift the stay until all of the cases are resolved,” said Molly White, senior trial counsel for the SEC in Los Angeles and lead attorney on the case. “I don’t know what the judge will do in this situation. But in other situations, judges have continued the stay until all outstanding cases are resolved.”
White declined to comment on how the judge’s ruling in Samueli’s criminal case might affect the suit.
Greenberg Traurig’s Piazza, who spent more than two years as the SEC’s senior trial counsel in Los Angeles, characterized the criminal and civil cases as “intertwined.”
“The impact of what Judge Carney did in the criminal case will certainly have to be addressed in the civil case,” he said.
At stake for Samueli, who also owns the Anaheim Ducks hockey team, is complete versus partial exoneration in Broadcom’s options ordeal.
The dismissal of his criminal case was a huge win. The judge said Samueli’s 2007 statement to SEC investigators was “ambiguous and evasive” but didn’t constitute a false statement.
The judge seemed to have been influenced by Samueli’s testimony that he had only passing involvement in the granting of options at Broadcom.
Even with Samueli’s plea bargain and partial immunity for his testimony, his legal fate was unclear before last week.
In October, Carney put off sentencing Samueli in his plea bargain. The judge raised questions about the severity of the punishment and said he wanted to wait until after the trials of Ruehle and Nicholas.
That raised questions of whether the judge might seek a more severe penalty or whether prosecutors might seek to actually try Samueli.
Old Job?
What now hangs in the balance with the SEC is whether Samueli can resume his formal titles with Broadcom.
In early 2008, he stepped down as chairman and chief technology officer right before being sued by the SEC.
Since then, he has served as a full-time technology adviser to Broadcom with no role in financial or corporate affairs.
“There is no order at this time prohibiting him from acting as an officer at the company,” the SEC’s White said.
Broadcom declined to comment on Samueli’s future beyond a statement last week from Chief Executive Scott McGregor.
The “decision by the court means that Dr. Samueli will continue to devote his extraordinary engineering expertise for the best interests of Broadcom’s employees, shareholders and the many other businesses that rely on Broadcom’s continued great success,” McGregor said.
In early 2007, Broadcom restated financial results from 1999 through 2005 to reflect $2.2 billion in charges for misdated stock options. The restatement bill was the largest of any company involved in a stock options issue.
Ruehle, who left in 2006, and Nicholas, who left in 2003, are charged with conspiring to conceal and understate the chipmaker’s compensation expenses by backdating options.
Nicholas also faces trial later next year in a separate drug case.
Some contend the judge’s move in Samueli’s case was a blow to the prosecution, headed by Assistant U.S. Attorneys Andrew Stolper and Gregory Staples.
Stolper was pinpointed by Carney for alleged misconduct and for leaking information to the media.
“This is an enormous blow to the prosecution,” Chapman’s Rosenthal said. “When a judge loses confidence in the prosecution, it becomes extremely difficult for them to proceed.”
Carney is considering an acquittal for Ruehle. The judge last week directed Ruehle lawyer Richard Marmaro to prepare acquittal motions for a hearing set for Tuesday.
Carney dismissed jurors before throwing out Samueli’s case. But the jurors, who aren’t sequestered, could have seen news of the move last week.
“Whenever a jury gets the sense that the prosecution has overreached, it inevitably loses confidence in the prosecution,” Rosenthal said. “Without that confidence, it’s practically impossible to find the defendant guilty beyond a reasonable doubt.”
