Four from Broadcom Accused of Backdating Stock Options
May 19th, 2008 • Posted in: NewsSEC claims they misrepresented data in order to hike value of their portfolios
SAN FRANCISCO
The legal and ethical issue of stock option backdating, a practice that recently made headlines in a variety of high-tech industries, was back in the news last week after the U.S. Securities and Exchange Commission (SEC) filed a civil complaint against California-based microchip producer Broadcom.
The SEC complaint alleges that from 1998 to 2003, Broadcom’s former president and CEO Henry Nicholas, chief technical officer Henry Samueli, former CEO William Ruehle, and general counsel David Dull falsified employee compensation documentation, the Jurist reports.
According to a MarketWatch report, the SEC alleges that the options were falsified to make it appear that they were granted when Broadcom’s stock was at a low point.
Broadcom spokespeople did not immediately comment on the charges, according to a report from PC World.
The charges follow a $12 million settlement in April between Broadcom and the SEC, also relating to backdating allegations, business publication TheStreet.com reports.
A stock option is an offer made by a company to allow someone to buy shares of stock in the future at a predetermined price. That predetermined price often is set at the market price of the stock on the day the option was granted — making the stock option an especially attractive commodity because stock prices in expanding firms, such as high-tech companies, usually are expected to rise quickly. Because they promise great future value but involve little immediate outlay of money, stock options are a popular recruiting tool for cash-strapped startups.
In the past few years, however, investigators have been alleging that some companies have backdated the granting of options to times when prices were even lower. That action, in and of itself, is not illegal, but hiding the details of the arrangements and the income is.
Sources: Jurist, May 15 — PC World, May 14 — MarketWatch, May 14 — TheStreet.com, May 14.
For more information, see: Related Newsline story, Jan 16, 2007 — Related Newsline story, Jan. 2, 2007 — Related Newsline story, Dec. 18, 2006 — Related Newsline story, Nov. 6, 2006 — Related Newsline story, Oct. 16, 2006.
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