Seeking the best and brightest during the tech boom, Broadcom Corp. founders Henry T. Nicholas III and Henry Samueli tossed out millions of stock options to attract and reward favored employees, whose Porsches and Lamborghinis gleamed in the parking lot as they worked late into the night.
On Wednesday, federal regulators accused the Orange County billionaires of manipulating the options illegally for five years. Hours later, Samueli stepped down as chairman and chief technical officer of the Irvine chip maker.
"I could not in good conscience allow today's unfortunate turn of events to become a distraction to the company I co-founded," Samueli, a major philanthropist and owner of the Anaheim Ducks NHL team, said in a statement.
Nicholas, who quit as chief executive in May 2003, could not be reached, and his lawyer declined to comment. In mid-April, Nicholas checked into the Betty Ford Center for an alcohol treatment program.
In a lawsuit filed Wednesday, the Securities and Exchange Commission accused Samueli and Nicholas of systematically backdating 232 million options to make them more valuable, then hiding the fact from other shareholders. The suit, filed in federal court in Santa Ana, said the fraud involved as many as 88 options grants.
The SEC named as defendants two other key players in Broadcom's ascent to the giddy height of success during the dot-com boom: former Chief Financial Officer William J. Ruehle and current General Counsel David A. Dull.
All four have denied that they acted improperly. Samueli's lawyer lashed out at the SEC, accusing the regulators of "trying their case in the media."
Samueli, in an e-mail to "my colleagues and friends at Broadcom," said it would be "inappropriate" for him to continue on the board and as an officer while the SEC case was pending.
"I will, however, continue to remain an employee of the company in the role of technology advisor to the CEO," he said. "I also remain fully committed to pursuing energetically my family philanthropic endeavors as well as our other family business activities including the Anaheim Ducks."
The SEC seeks to bar all four from ever serving as officers or directors of public companies. It also demands that Ruehle and Dull return "ill gotten gains" of $100,000 and $1.8 million, respectively, and that Nicholas and Ruehle repay unspecified bonuses and stock sale profits.
