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March 19, 2010 | By Stuart Pfeifer
The key prosecution witness against former KB Home Chief Executive Bruce Karatz admitted in cross-examination Thursday that he told numerous lies about the company's stock option practices during his initial meetings with the FBI and federal prosecutors. The concession by KB Home's former human resources chief, Gary Ray, came during five hours of questioning by Karatz's defense attorney. On Wednesday, Ray implicated Karatz in a scheme to conceal the backdating of employee stock options from authorities.
March 18, 2010 | By Stuart Pfeifer
Former KB Home chief Bruce Karatz engineered a massive stock option scheme that made him millions of dollars and then fought to keep it secret from investigators, a longtime company executive testified Wednesday. Gary Ray, who served as KB's human resources director from 1996 to 2006, told a federal jury in Los Angeles that he and Karatz backdated stock options to make them more valuable to themselves and employees and then concealed it from company shareholders and the Securities and Exchange Commission.
March 12, 2010 | By Stuart Pfeifer
The stock option backdating trial of former KB Home chief Bruce Karatz opened Thursday in Los Angeles with two vastly conflicting portraits of the man who steered the giant home-building company for decades. A federal prosecutor told jurors in his opening statement that Karatz was a greedy man who made more than $6 million in "secret pay" by manipulating stock option grant dates and then lying about it in regulatory filings and in interviews with lawyers and accountants. "He stole without shareholders' knowing about it and he used stock options to do it," Assistant U.S. Atty.
March 8, 2010 | By Stuart Pfeifer
Two months after the federal government's criminal cases against Broadcom Corp.'s top executives collapsed, the U.S. attorney's office is taking aim at another stock-options backdating target: former KB Home chief Bruce Karatz. The stakes will be high for federal prosecutors when Karatz's trial starts Tuesday in Los Angeles. Not only will they be seeking to punish a man they say flouted federal law while making millions of dollars for himself and his employees, they'll also be seeking to improve the record of a massive options crackdown that so far has yielded few convictions.
January 22, 2010 | By Stuart Pfeifer
Federal prosecutors are defending the investigation that led to felony options-backdating charges pending against former KB Home Chief Executive Bruce Karatz. In a motion filed in federal court in Los Angeles, the prosecutors accused Karatz of making baseless allegations of prosecutorial misconduct in order to block damaging testimony against him at his trial set for next month. Two weeks ago, defense attorneys filed a motion accusing prosecutors of intimidating two former KB Home employees who now say Karatz changed the dates of stock option grants to enrich himself and others without accounting for them in regulatory filings.
January 6, 2010 | By Stuart Pfeifer
Cleared last month of criminal wrongdoing by a federal judge, Broadcom Corp. co-founder Henry Samueli has returned to the Irvine chip designer as senior vice president and chief technical officer, a company spokesman said Tuesday. Samueli, who founded Broadcom in 1991 with friend Henry T. Nicholas III, resumed his former positions in December after a federal judge threw out his guilty plea in a stock- option backdating case, said Bob Marsocci, Broadcom's vice president for corporate communications.
December 30, 2009 | By E. Scott Reckard and Martin Zimmerman
Broadcom Corp. said Tuesday it would pay $160.5 million to settle a securities fraud lawsuit over backdated stock options, an agreement that comes less than three weeks after a federal judge threw out related criminal cases and a government civil action. The resolution marks the third time Broadcom has agreed to pay millions of dollars to settle options-related litigation, but the company cast the development as the beginning of the end for the long-running controversy. "Today's settlement brings Broadcom closer to the day when we can put the stock-option cases behind us once and for all," said Scott McGregor, chief executive of the Irvine microchip company.
December 19, 2009
The Justice Department's crackdown on stock-option backdating took a thunderous hit this month when U.S. District Judge Cormac J. Carney dismissed charges against three former Broadcom executives -- only one of whom was on trial at the time. The judge was so upset with the prosecutors' behavior, he even dismissed the Securities and Exchange Commission's lawsuit against the company. Carney's accusations of witness intimidation and tampering are serious enough to warrant an internal investigation by the Justice Department, and one is underway.
December 17, 2009 | By Stuart Pfeifer and E. Scott Reckard
The stunning dismissals of criminal cases against three former Broadcom Corp. executives in the last week focused on what the judge called "shameful" misconduct by prosecutors. But at the core, he had something more telling to say: Prosecutors couldn't prove the defendants did anything wrong. The Broadcom cases, among others, illustrate the struggles the U.S. attorney's office has encountered in prosecuting corporate executives for backdating stock options, a practice that makes it appear that their companies had fewer expenses and greater income than they really had. Among the most elusive elements in such cases, lawyers said, is proof that executives intended to commit a crime by backdating the options and conceal their actions.
December 16, 2009
Broadcom timeline Stock options, typically used as incentive pay, allow employees to buy stock in the future at current prices. Broadcom Corp. and other companies also backdated the options to a previously lower price to give employees a little extra when they cashed in the options. Backdating was legal as long as the expense was disclosed publicly. Here are events in Broadcom's backdating case: 2006 May 18: A report by the Center for Financial Research and Analysis, representing institutional investors and others, finds Broadcom "at risk" for having backdated option grants during the five-year period that ended in 2002.
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