Broadcom backdating stock options

09 May

Henry Samueli, co-founder of Irvine-based Broadcom Corp., pleaded guilty Monday to one count of lying to the U. Securities and Exchange Commission about his role in the backdating of employee stock option grants. Carney accepted Samueli’s guilty plea and set sentencing for Aug. Samueli can withdraw his guilty plea if Carney deviates from the agreed-upon sentence, Carney said.Under a plea agreement with the government, Samueli is expected to be sentenced to five years probation. During a 45-minute hearing at the Santa Ana federal courthouse on Monday afternoon, U. Samueli owns the Anaheim Ducks and is a prominent Orange County philanthropist. 195 in the Forbes list of the 400 richest Americans last year, with a net worth of .3 billion.Options are “in the money” if the options are exercised when the stock is trading above the grant-date price.Backdating the grant date to a day when the company stock was at a low price would increase the likelihood those options would be in the money.“The backdating scheme at Broadcom went on for five years, involved dozens of option grants, and resulted in the largest accounting restatement to date arising from stock option backdating,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement.“The scope and magnitude of the fraud warrants the significant penalty imposed on the company.” Federal criminal and civil investigations continue against top Broadcom executives, including the chairman and chief technical officer, Henry Samueli, and the former chief executive officer, Henry T.The SEC’s opinions regarding backdating and fraud were primarily due to the various tax rules that apply when issuing “in the money” stock options vs.the much different – and more financially beneficial – tax rules that apply when issuing “at the money” or "out of the money" stock options.

Carney found that prosecutors tried to prevent three key defense witnesses from testifying, improperly contacted attorneys for defense witnesses and leaked information about grand jury proceedings to the media.Ruehle’s attorney denied his client was responsible for violations.“When all of the facts are heard, it will be clear that Bill Ruehle was never on the Company’s board of directors or stock option committee; he never had authority or responsibility to grant stock options, or to select grant dates, and he never did so,” attorney Richard Marmaro said.In 1972, a new revision (APB 25) in accounting rules resulted in the ability of any company to avoid having to report executive incomes as an expense to their shareholders if the income resulted from an issuance of “at the money” stock options.In essence, the revision enabled companies to increase executive compensation without informing their shareholders if the compensation was in the form of stock options contracts that would only become valuable if the underlying stock price were to increase at a later time.