Defense lawyers argued that it was unfair to expect engineers such as Samueli and Nicholas to understand rules that accountants themselves didn't.
Erik Lie, a University of Iowa business professor whose research helped expose the backdating scandal, has calculated that 13.6% of all option grants to top executives from 1996 through 2005 were backdated or otherwise manipulated. Despite that, he said, "it's not always clear what happened inside the companies. I think in most cases it was illegal, but it's very difficult to prove."
There was some genuine confusion about rules for accounting for options, he said, and executives at many companies used that as a cover to manipulate stock option grants aggressively.
One pending options-related prosecution involves Bruce Karatz, former chief executive of KB Home. He faces 20 counts of fraud and making false statements in backdating stock option grants for himself and employees without disclosing the practice. He has pleaded not guilty.
Karatz's attorney, John Keker of San Francisco, said he believes prosecutors will encounter the same problems as they have in previous options cases. "The recent decisions in the backdating trials show just how misguided the criminal prosecution of these option pricing cases is," he said. "The accounting rules made little sense. Company after company applied those rules in good faith, in a way the government now says was wrong."
Without addressing the Karatz case specifically, Mrozek, the U.S. attorney's spokesman in Los Angeles, said: "A setback in one case will not dissuade us from our pursuit of justice in a similar case."
One difference between the Karatz and the Broadcom cases: Karatz is accused of improperly manipulating his own stock options; the Broadcom cases were focused on misdated options for the rank-and-file engineers and other employees of the company.
That could have a bearing in court, said litigator Hochman: "Personal greed is a tried-and-true motivation the government has used to prove why someone commits a crime."