Feds Name Nicholas, Samueli at Broadcom Options Backdating Plea

January 29, 2008 (PLANSPONSOR.com) - Federal prosecutors reluctantly identified the co-founders of Broadcom Corp. as "unindicted potential co-conspirators" in a stock options backdating scheme.

The revelation of the names of Henry T. Nicholas III and Henry Samueli – who had previously only been identified as “Executive A” and “Executive B” – came during a court hearing at which former human resources executive Nancy Tullos pled guilty to one count of obstruction of justice as part of an agreement, the Associated Press reported (See  Broadcom Ex-Exec Pleads Guilty in Options Probe ).

Prosecutors had to reveal the names after U.S. District Judge Cormac J. Carney said not identifying them would undermine the factual basis of the Tullos plea deal and violate the principles of open court hearings. However, Assistant U.S. Attorney Andrew Stolper argued that releasing their names, as well as that of a Broadcom engineer identified only as “M.N.,” would create prejudice against them since they have not been indicted in the case, the news report said.

Carney asserted: “They shouldn’t get any other special treatment than the general public would. That’s not what American justice is all about.”

In January 2007, Broadcom reduced previous financial results by $2.2 billion to account for improperly backdated stock options. Documents filed with the Securities and Exchange Commission a year ago stated that an internal audit at Broadcom indicated that Nicholas had significant responsibility for improperly backdated stock options.

The audit also found that other executives, including Tullos, had substantial responsibility for the inappropriate grant practices.

Tullos left the Irvine, California-based semiconductor maker in October 2004, a year after Nicholas departed.