Email Picture

Karen Tapia-Andersen, Los Angeles Times

Henry
Samueli, owner of the Anaheim Ducks hockey team and co-founder of
technology company Broadcom Corp. of Irvine, in a 2006 photo.

FOR THE RECORD:

An earlier version of this article incorrectly reported that Broadcom
co-founder Henry Samueli was sentenced to five years of probation as
part of a plea agreement. A judge rejected that deal.

Adkins and Samueli defense attorney Gordon Greenberg declined to comment after the hearing.


Samueli, 53, of Corona del Mar has stepped down as chairman and
chief technology officer of Broadcom, an Irvine designer of computer
chips for mobile phones, Apple Inc.'s iPod and other communications
products.



One of Southern California's most prominent philanthropists, he is also
the owner of hockey's Anaheim Ducks. The National Hockey League has
suspended him pending the outcome of the criminal case, and the
University of California is studying whether his name should be removed
from the engineering schools at UCLA and UC Irvine, where he has been a
major donor.



The judge's decision means that Samueli may now withdraw the guilty
plea he entered in June to one felony count of making a false statement
to the SEC. That charge carries a maximum prison term of five years,
but under federal sentencing guidelines, probation would be considered
appropriate for someone like Samueli with no prior record.



John C. Coffee, a Columbia University securities law professor, said
it's "extraordinarily" rare though not unprecedented for a federal
judge to reject a prosecution deal with a defendant.



Calling Carney's decision "well reasoned," he noted that the judge, who
is not a former prosecutor, seems more independent than many judges who
have been prosecutors.



Although Carney, who was an All-American wide receiver at UCLA and
played in the pro United States Football League before going to Harvard
Law School, has been known to show sympathy for some defendants, he
also has a reputation for coming down hard at times on defendants
convicted of white-collar crimes.



In 2006, he sentenced money manager James P. Lewis Jr. to 30 years in
prison for swindling 1,600 investors out of $156 million in a Ponzi
scheme that the judge called a "crime against humanity."



Of about 200 stock-option backdating cases that the Securities and
Exchange Commission has reviewed, only a handful have landed in
criminal court. One involved San Jose's Brocade Communications Systems,
whose former chief executive, Gregory Reyes, was sentenced to 21 months
in prison and fined $15 million in January after being convicted of
conspiracy and fraud. Reyes is free while appealing his conviction.



Samueli is a defendant in an SEC lawsuit that says Broadcom's
$2.2-billion understatement of compensation expense because of
backdated options was the largest among a host of such cases the SEC
looked into.



Stock options bestow the right to purchase shares in a company at a set
price, generally the stock's closing price on the day the options are
granted. The higher the stock price goes after the options are granted,
the more they are worth, motivating employees to strive for the
company's success.



The SEC suit contends that top Broadcom executives did not disclose
that they backdated the options to days when the stock traded at low
points, which had the effect of secretly rewarding employees by making
the options more valuable.



In the parallel criminal case, Samueli is listed as an unindicted
co-conspirator, mentioned 72 times in a federal indictment of Broadcom
co-founder Henry T. Nicholas III, the company's former CEO, and William
Ruehle, its former chief financial officer.



Noting that Nicholas and Ruehle, if convicted, could theoretically be
sentenced to more than 300 years each in prison, Carney added that
people convicted in "run of the mill" frauds serve on average 17 months
in prison. What's more, he said, the U.S. Probation Office's report on
Samueli concluded that probation was insufficient and recommended a
year in prison.



The judge also objected that the plea agreement did not require Samueli
to cooperate with prosecutors or to testify at the trial of Nicholas
and Ruehle. A fourth Broadcom executive, former personnel director
Nancy Tullos, had such a cooperation provision in her agreement with
the government when she pleaded guilty to obstruction of justice, noted
Carney, who is to sentence Tullos on May 11.



The probation office's recommendation for prison time makes Carney's decision practically "appeal proof," Coffee added.



scott.reckard@latimes.com



Times staff writer Helene Elliott contributed to this report.

UPDATE 24 Sep 2009

Broadcom co-founder loses bid to revive plea deal

* Plea agreement called for probation, not prison

* Rejection of plea agreement not reviewable on appeal
(Adds comment by Samueli's lawyer, details on Anaheim Ducks
ownership; recasts second paragraph)

By Jonathan Stempel

NEW YORK, Sept 24 (Reuters) - A federal appeals court dealt
Broadcom Corp's (BRCM.O) billionaire co-founder Henry Samueli a
setback in his effort to avoid possible imprisonment for lying
about his role in backdating stock options.

The U.S. Ninth Circuit Court of Appeals on Thursday said it
could not reinstate a proposed plea bargain that called for
Samueli to serve five years of probation, pay a $250,000 fine
and pay $12 million to the U.S. Treasury Department.

Samueli, 55, had pleaded guilty in June 2008 to one count
of falsely telling U.S. Securities and Exchange Commission
investigators that he was not involved in backdating at
Broadcom, an Irvine, California-based computer chip maker.

He accepted probation rather than face a possible five-year
prison sentence, but U.S. District Judge Cormac Carney rejected
the agreement on Sept. 8, 2008, saying it "does not capture the
seriousness of Dr. Samueli's alleged misconduct."

Samueli declined to withdraw his guilty plea but appealed
the order. He still awaits sentencing.

Thursday's ruling did not address the merits of arguments
by Samueli, who owns the Anaheim Ducks team in the National
Hockey League. The NHL suspended him after his guilty plea.

Gordon Greenberg, a partner at McDermott Will & Emery LLP
in Los Angeles representing Samueli, in a statement said "we
will carefully review the court's analysis and consider all our
options."

Stock options let holders buy shares in the future at fixed
prices. Backdating involves retroactive grants on dates when a
stock price was low, which can make the awards more valuable.
Concealing the practice can inflate a company's earnings.

Backdating at Broadcom led to a $2 billion restatement.

Co-founder Henry Nicholas and former chief financial
officer William Ruehle have also been indicted over backdating,
and Nicholas also on drug charges. Both pleaded innocent.

In Thursday's ruling, a three-judge panel said Samueli's
case did not warrant an exception to the "broad rule" that
orders in criminal cases cannot be reviewed until both a
judgment and sentence are imposed.

Judge Ronald Gould wrote that it is "not at all clear" what
Samueli's

more...http://www.reuters.com/article/technology-media-telco-SP/idUSN2446002320090924

Here’s %category%-related post from

Business on HuffingtonPost.com:

SANTA ANA, Calif. — A federal judge Tuesday dismissed
fraud and conspiracy charges in the stock-option backdating case
against Broadcom Corp. co-founder Henry T. Nicholas III and former
Chief Financial Officer William Ruehle because of prosecutorial
misconduct. U.S. District Judge Cormac J. Carney also asked prosecutors
to explain why a separate drug indictment against Nicholas should not
also be thrown out, and he dismissed a civil case the Securities and
Exchange Commission filed against four Broadcom executives. The
stunning move came after Carney last week vacated a guilty plea by
Broadcom co-founder Henry Samueli in the same case after hearing him
testify for two days as a defense witness for Ruehle under a grant of
immunity. Carney found that prosecutors tried to prevent three key
defense witnesses from testifying, improperly contacted attorneys for
defense witnesses and leaked information about grand jury proceedings
to the media. “I find that the government has intimidated and
improperly influenced the three witnesses critical to Mr. Ruehle’s
defense and the cumulative effect of that misconduct has distorted the
truth-finding process and impeded the integrity of the trial,” Carney
said. “To submit this case to the jury would make a mockery … of the
constitutional right to due process and a fair trial.” The judge said
Nicholas would need the same three defense witnesses to try to prove
his own innocence, and because of that, he too could not receive a fair
trial. “You only have three witnesses to prove your innocence and the
government has improperly intimidated … each one of them. Is that fair?
Is that justice?” Carney said. “I say, absolutely not.” Defense
attorneys wept after the ruling as Samueli and Nicholas embraced
nearby. Outside court, Samueli called the decision “the ultimate
vindication” for himself, Nicholas, Ruehle – and Broadcom. He said
Carney’s rulings restored his faith in the judicial system. “I was
holding my wife’s hand, and I squeezed her hand, and tears just came to
my eyes,” he said. Ruehle told reporters he was shocked the case was
over. “After all this time of being a defendant and being accused
wrongly, it hasn’t sunk in yet,” he said. “Obviously it’s a wonderful
feeling.” Prosecutors left court without talking to reporters, but
acting U.S. Attorney George Cardona told the judge he did not agree
with the ruling. Prosecutors can appeal the dismissal of Nicholas’
indictment, but Ruehle cannot be tried again because it would be double
jeopardy. Ruehle had pleaded not guilty to 14 counts of fraud and
conspiracy in the high-profile investigation into stock option
backdating at Irvine-based Broadcom, one of the most successful
semiconductor developers in the world with nearly $5 billion in
revenues last year. Backdating involves retroactively setting a stock
option’s exercise price to a low point in the stock’s value, boosting
profits when the shares are sold. It is legal when properly accounted
for, but if not properly disclosed it can allow companies to overstate
profits and underpay taxes while diminishing shareholder value.
Prosecutors had alleged that the company’s leadership conspired to
conceal millions in compensation by awarding stock options to
employees. Broadcom was ultimately forced to write down $2.2 billion in
profits after the backdating was uncovered, and it paid $12 million to
settle a civil complaint without admitting wrongdoing. Ruehle’s
attorneys alleged that lead prosecutor Andrew Stolper leaked
information about Samueli’s 2007 grand jury appearance to reporters and
contacted the attorneys of two other witnesses to try to influence
their testimony. One of those was former Broadcom general counsel David
Dull, who was granted immunity to testify in Ruehle’s case. In a
hearing away from the jury last week, Stolper acknowledged leaking
information to the press and called it the “stupidest thing I have done
in my career.” He has declined to comment outside court. Carney tossed
Samueli’s guilty plea last week and dismissed a charge that the
55-year-old billionaire owner of the NHL’s Anaheim Ducks lied to SEC
investigators. The judge determined that Samueli did not commit the
offense after the co-founder testified for two days for Ruehle’s
defense under a grant of immunity. Nicholas was set for trial next year
on two separate indictments, one alleging fraud and conspiracy in the
backdating case, and the other involving federal drug charges. Samueli
and Nicholas started Broadcom in 1991 and took it public in 1998. The
company grew to 7,000 employees worldwide and is a leading manufacturer
for the chips used in everything from cable boxes to cell phones.

Tuesday, December 29, 2009

Broadcom To Settle Stock Options Class Action Suit