Chipmaker Broadcom stock options backdating case ends

* Prosecutors decide not to appeal

* Judge had dismissed charges against Broadcom execs

By Alex Dobuzinskis

LOS ANGELES, May 28 (BestGrowthStock) – U.S. prosecutors will not
appeal a judge’s dismissal of stock options backdating-related
charges against computer chipmaker Broadcom Corp (BRCM.O: )
co-founders Henry Nicholas and Henry Samueli.

The decision announced on Friday ends one of the U.S.
government’s biggest stock-option backdating cases in years,
derailed when a judge found evidence of prosecutorial
misconduct.

U.S. District Judge Cormac Carney in December dismissed the
stock options backdating case against Nicholas, after setting
aside Samueli’s guilty plea on charges of falsely telling
investigators he was not involved in backdating.

In January, U.S. prosecutors indicated they planned to
appeal the judge’s decision. The prosecutors had needed
approval from Justice Department officials in Washington to
launch their appeal, and had faced a June 10 deadline.

“After a thorough evaluation of the issues associated with
the cases, the government decided to not pursue the appeals,”
Thom Mrozek, a spokesman for the U.S. Attorney’s Office, said
in a statement.

Stock options backdating at California-based chipmaker
Broadcom led to a $2.2 billion write down in 2007.

Backdating involves setting a stock option price at a date
prior to the date the option is issued. Options usually must be
granted at an exercise price no lower than the stock’s fair
market value on the date of the option grant.

Backdating to a date when the stock price was lower
instantly puts the option “in the money”.

Although backdating as such is not illegal, companies and
recipients must disclose it and follow pertinent accounting and
tax rules.

Carney questioned whether the government ever had proof of
crimes at Broadcom, which he found engaged in similar
accounting practices as Apple Inc (Read more about Apple stock future.) (AAPL.O: ) and Microsoft Corp
(MSFT.O: ) by backdating stock options.

Carney also found U.S. Attorney Andrew Stolper conducted a
“campaign of intimidation” to force Samueli and Tullos to plead
guilty to crimes they did not commit, and cited witness
intimidation by prosecutors.

The government’s most sensational allegations in the case
were that Nicholas, a co-founder, distributed cocaine, ecstasy
and methamphetamine at parties at his homes. But Carney
dismissed the case against Nicholas, again due to findings of
witness intimidation by prosecutors.

And Carney in December threw out the stock-option
backdating case against former Broadcom chief financial officer
William Ruehle. Nicholas and Ruehle faced life in prison if
they had been convicted.

Investment

(Reporting by Alex Dobuzinskis: Editing by Michael Perry)

Chipmaker Broadcom stock options backdating case ends