Technology billionaire and philanthropist Henry Samueli pleaded guilty Monday to a felony charge of lying to regulators about his role in an alleged plot to secretly reward his Broadcom Corp. employees by manipulating stock options.
Under a deal with prosecutors, Samueli pleaded guilty in federal court in Santa Ana to making a false statement to the Securities and Exchange Commission. The government is recommending five years' probation and $12.2 million in fines and penalties at sentencing, scheduled for Aug. 18.
Samueli, 53, who also owns the Anaheim Ducks National Hockey League team, becomes the most prominent executive convicted in the federal investigation of the manipulation of stock options. His guilty plea Monday spares him jail time but complicates the legacy of one of Southern California's biggest philanthropists.
"There are people who come back from criminal convictions, but usually only after a long period of penance and full admission of responsibility," said John Coffee, a Columbia University law professor and expert in white-collar crime. "But if he continues to give away a billion dollars in a thoughtful manner, I'm sure there are plenty of people out there who will forgive him."
Born to survivors of Nazi Europe who arrived destitute in the United States, Samueli started off stocking the shelves of his family's Los Angeles liquor store, launched a chip-making firm in his partner's home and rode the 1990s tech boom to a multibillion-dollar fortune.
Along the way, he gained a reputation as a sober-minded scientist and a soft touch for good causes that included the arts, higher education, a Holocaust memorial library and a marine science institute for children.
Samueli, with a fortune estimated by Forbes magazine at just under $2 billion, can afford the fine, said Barry Slotnick, a white-collar defense attorney in New York. And by pleading guilty, Slotnick added, Samueli avoids an even greater threat to his name: jail time.
"At the end of the day Henry Samueli has a huge legacy and will be remembered not for his guilty plea but for his generosity to needy causes," Slotnick said.
The statement that prosecutors focused on was made May 25, 2007, when Samueli denied under oath a role in making options grants to high-ranking executives.
"I was not involved in the actual granting process," Samueli said.
That statement was false, Samueli said Monday, because in January 2002 he twice helped to decide the date on which options should be granted. In his plea, he admitted being part of the options-granting process but stopped short of acknowledging that the options awards were flawed.
Stock options are rights to buy shares at a set price at a future date. If the stock price goes up, recipients make money. Irvine-based Broadcom, like many other technology companies, backdated the grant dates to take advantage of dates when the stock price was low, so that the options were already "in the money" when they were awarded.
During the tech boom, Samueli and Broadcom co-founder Henry T. Nicholas III awarded millions of stock options to attract and reward employees. Samueli and Nicholas didn't receive backdated options themselves, but prosecutors alleged they granted them to others, including some other top executives, to avoid having to report $2.2 billion in compensation costs to shareholders.
Last month, the SEC filed a civil suit against Samueli and Nicholas, leading Samueli to step aside as chairman and chief technical officer of Broadcom, which makes chips used in a variety of products, including Apple iPhones and Nintendo Wii game consoles. The SEC is also seeking to bar Samueli from serving as an officer of a public company, though Broadcom said in a statement that the plea agreement, if approved at sentencing, would allow Samueli to remain as a technical advisor.
A federal grand jury indicted Nicholas this month on 25 counts of backdating stock options, distributing drugs to associates and spiking the drinks of Broadcom customers. He has pleaded not guilty and faces the possibility of lengthy prison time if convicted.
Samueli's plea agreement does not require him to cooperate with or testify for the government. Legal experts said it would be problematic for prosecutors to call a witness who had admitted to lying to the SEC. Even so, U.S. District Judge Cormac J. Carney suggested Samueli might wind up on the stand -- for the defense.
"I don't think I have to be a rocket scientist to think Dr. Nicholas is going to call him," Carney said.
Samueli's attorney, Gordon Greenberg of Los Angeles, said he was aware that might occur. He acknowledged that if Nicholas called Samueli to the stand, Carney might rule that Samueli had waived any right not to testify on grounds he might incriminate himself.
Samueli's guilty plea Monday did not have any immediate bearing on his ownership of the Ducks, the team he purchased in 2005, or Anaheim Arena Management, which operates Honda Center.