SEC drops backdating suit against Broadcom figures - 5 Feb 2010
By Benjamin Pimentel, MarketWatch
SAN FRANCISCO (MarketWatch) -- The U.S. Securities and Exchange
Commission has dropped its stock options backdating suit against four
Broadcom Corp. figures, including the chipmaker's cofounders.
Shares of Irvine, Calif.-based Broadcom
/quotes/comstock/15*!brcm/quotes/nls/brcm
(BRCM
29.42,
+0.03,
+0.10%)
surged 6.1% to close at $29.39.
The SEC said Thursday it has decided not to pursue the case it filed
against cofounders Henry Nicholas III and Henry Samueli and two other
former executives, William Ruehle and David Dull.
The agency said it made decision "based on rulings and comments from
the court," referring to a federal judge's earlier statements in a
related criminal case against Ruehle and Nicholas, questioning "the
conduct of the U.S. Attorney's Office and the sufficiency of the
evidence."
The SEC's decision was another victory for Nicholas, who had faced
federal criminal charges related to options backdating and illegal drug
use and distribution. Nicholas was accused of secretly spiking the
drinks of customers' representatives with the drug ecstasy, hiring
prostitutes for them and associates and smoking marijuana on a private
plane, prompting the pilot to wear a gas mask.
A federal judge threw out the stock options backdating allegations,
accusing prosecutors of misconduct, including trying to pressure
witnesses. The U.S. Attorney's office later withdrew the drug-related
charges.
On Thursday, the SEC said the court had dismissed its complaint
"without prejudice and "discouraged the commission from proceeding
further with its action.
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I find this article particularly interesting.
When the "backdating scandal" hit the news cycle (now years ago). The emphasis was on the "fact" that "probably" close to 2,000 companies were involved in backdating. Companies were drug through the mud. Stock options were vilified. It was a foregone conclusion that the fines would be enormous, tons of C-Suite officers would lose their jobs and many would go to jail.
The story about Broadcom was seemingly the most salacious and convoluted of all. Spiking drinks, drug use, supplying escorts were all brought up as though 1. they had anything to do with equity compensation. 2. They were proven facts. In the end the federal government dropped the drub and related charges and now the SEC has formally dropped the backdating charges.
If you search on the word "Broadcom" here on the ECE site you will find many stories related to this issue. As professionals in our industry I am sure we are all more vigilant than ever in making sure that every grant, exercise, termination etc. follow processes exactly. Second, we should be wondering how the details of dropped cases like this impact the public perception of what we do, even when, in the end, the proof was far less fantasical than reported.