Broadcom to Pay $12M to Settle Options Backdating Charges

The Securities and Exchange Commission (SEC) announced on Tuesday it had charged Broadcom with falsifying its reported income by backdating stock option grants over a five-year period. As a result of the fraud, Broadcom restated its financial results in January 2007, reporting more than $2 billion in additional compensation expenses.

“The backdating scheme at Broadcom went on for five years, involved dozens of option grants, and resulted in the largest accounting restatement to date arising from stock option backdating,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement, in the announcement. The SEC’s complaint filed in the U.S. District Court for the Central District of California alleges that from June 1998 to May 2003, Broadcom, acting through its top officers, misrepresented the dates on which stock options were granted to executives and employees.

The SEC alleges that the option committee comprised of Broadcom’s chairman and chief technology officer along with its former CEO approved as many as 88 grants during the relevant period, but for many of these grants there was no meeting or decision made by the committee on the dates the grants were supposedly approved. The SEC said Broadcom’s former CFO selected many of the grant dates retroactively based on a comparison of Broadcom’s historical stock prices, and the two option committee members concealed the backdating by signing false written consents stating that the grant had been approved “as of” the retroactive date.

In December, Broadcom’s former vice president of human resources, Nancy Tullos, agreed to plead guilty to charges in connection with an options backdating scheme (See Broadcom Ex-Exec Pleads Guilty in Options Probe ).   Individuals identified only as Executive A and Executive B in the complaint against Tullos were later identified as co-founders Henry T. Nicholas III and Henry Samueli (See Feds Name Nicholas, Samueli at Broadcom Options Backdating Plea ).