Broadcom's Samueli steps down as chairman amid fraud allegations
Broadcom Corp.'s Henry Samueli stepped down as chairman of the Irvine chip maker's board of directors today after federal regulators alleged that he and co-founder Henry T. Nicholas III fraudulently backdated stock options in a five-year scheme.
Samueli, who owns the Anaheim Ducks, also will take a leave of absence as Broadcom's chief technology officer, the company said in a statement. John E. Major, an independent director, was named non-executive chairman.
Filed in U.S. District Court in Santa Ana, the Securities and Exchange Commission's civil complaint also named former Chief Financial Officer William J. Ruehle and current General Counsel David Dull. Dull also took a leave of absence today.
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.
"As a result of the misconduct of Nicholas, Samueli, Ruehle and Dull, Broadcom's books and records falsely and inaccurately reflected, among other things, the dates of option grants, the company's stock-based compensation expenses, the company's operating results, and at least one employee's hire date," the complaint states.
Because of the alleged fraud, Broadcom restated its financial results in January 2007 and reported more than $2.2 billion in additional compensation expenses.
The complaint against current and former Broadcom officers comes on the heels of an SEC lawsuit filed against the company on April 22. It alleged that Nicholas, Samueli and other senior Broadcom executives "orchestrated and carried out" a long-running scheme to backdate stock options.
The illegal backdating occurred from June 1998 to May 2003 and involved as many as 88 options grants during a time of "tremendous growth" for the company, the SEC alleged in the earlier complaint. Broadcom agreed to pay $12 million to settle the lawsuit, without admitting wrongdoing.
Federal prosecutors also have identified Samueli and Nicholas as "unindicted potential co-conspirators" in a criminal investigation of the backdating allegations. That investigation is continuing, and the SEC lawsuits do not preclude a separate action by the Justice Department.
Nicholas, who entered a month-long alcohol rehabilitation program at the Betty Ford Center in mid-April, declined comment through his attorney.
