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Shareholder Suit Alleges Broadcom Used Improper Accounting Method

March 06, 2001|KAREN ALEXANDER | TIMES STAFF WRITER

Shareholders filed a federal lawsuit Monday against Broadcom Corp., alleging that the Irvine communications chip maker deceived investors in accounting for five acquisitions last year.

The lawsuit, which seeks status as a class action, contends that the company's accounting method amounted to a scheme to increase sales figures and to "keep the stock price high so as to make acquisitions less costly."

The company denied any wrongdoing. "We believe the lawsuit is without merit," said spokesman Bill Blanning. "Broadcom will vigorously defend itself."

The lawsuit was filed in U.S. District Court in Santa Ana on behalf of investors who purchased Broadcom stock between Oct. 18 and Feb. 26. It names Broadcom co-founders Henry T. Nicholas III and Henry Samueli, along with William Ruehle, the chief financial officer, as defendants.

Broadcom has acknowledged that in the course of five of its 12 acquisitions last year, it arranged for warrants to be issued to customers to lock in future sales.

Before purchasing the privately held companies, Broadcom said, it encouraged them to issue their customers warrants--promises to sell stock for less than a penny a share--in exchange for commitments to continue buying their products.

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