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Prosecutors win key ruling in case against Broadcom's ex-finance chief

A court says William J. Ruehle's statements to company lawyers about an alleged option-backdating scheme are not protected by attorney-client privilege and can be admitted as evidence at his trial.

October 01, 2009|Stuart Pfeifer

Federal prosecutors won a key ruling Wednesday in their option-backdating case against Broadcom Corp.'s former finance chief.

The U.S. 9th Circuit Court of Appeals in San Francisco ruled that prosecutors could introduce statements that William J. Ruehle, the Irvine chip maker's former chief financial officer, made to company lawyers about the alleged backdating scheme.

Ruehle is scheduled to stand trial beginning Oct. 20 in federal court in Santa Ana.

The opinion reverses a decision this year by U.S. District Judge Cormac J. Carney, who said the statements to the company lawyers were protected by attorney-client privilege and could not be admitted as evidence at his trial.

In June 2008, a federal grand jury indicted Ruehle and Broadcom co-founder Henry T. Nicholas III on charges of conspiracy and securities fraud. The indictment accuses Ruehle and Nicholas of secretly backdating Broadcom stock options from 1999 to 2005 to enrich certain company employees.

Wednesday's ruling focused on Broadcom's decision to retain the law firm Irell & Manella in 2006 to investigate its stock option grants, which had become the focus of media scrutiny.

The firm's review -- which included interviews with Ruehle -- prompted the company to restate its earnings in January 2007 and report $2.2 billion in previously undisclosed employee compensation.

Federal prosecutors launched an investigation after the restatement and interviewed Irell attorneys regarding their prior conversations with Ruehle.

Ruehle said he believed at the time that his statements to the lawyers were protected because the attorneys were working for his employer.

The appeals court disagreed, saying Ruehle knew the lawyers would disclose the statements to an outside accounting firm.

"That he might regret those statements after later learning of the subsequent corporate disclosure to law enforcement officials is not material," the appeals court said in its opinion, written by Judge Richard C. Tallman.

A lawyer for Ruehle declined to comment on the ruling, as did a spokesman for the U.S. attorney's office in Los Angeles.


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