Broadcom settles SEC charges of backdating options

SANTA ANA, Calif. -- The Irvine, Calif.-based company agreed to pay $12 million to settle the charges without admitting or denying the allegations, the U.S. Securities and Exchange Commission said in a statement.

The SEC said that as a result of the fraud, Broadcom restated its financial results in January 2007 and reported more than $2 billion in additional compensation expenses — the largest accounting restatement to date because of backdating.

"The backdating scheme at Broadcom went on for five years, involved dozens of option grants," Linda Chatman Thomsen, director of the SEC's enforcement division, said in a statement. "The scope and magnitude of the fraud warrants the significant penalty imposed on the company."

The agency accused Broadcom of using the backdated options to recruit and retain the most highly qualified staff without paying them higher salaries.

The agency alleges that a two-member option committee approved up to 88 grants between 1998 and 2003, in many cases without meeting on the dates the grants were supposedly approved. The committee members were co-founders Henry Samueli, Broadcom's chairman and chief technology officer, and Henry Nicholas III, then the company's chief executive.

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Brian Marshall, an attorney representing Nicholas and Samueli, referred calls to Nicholas' spokesman, Mark Saylor. In an e-mailed statement, Saylor said Nicholas "at all times … believed he was complying with company rules, as well as accounting and legal requirements."

Broadcom spokesman Bill Blanning said in a statement, "This is a major step in the process of closing this chapter as we remain focused on the company's business today and for the future."

Scott McGregor, Broadcom's chief executive officer, said he was pleased to announce the settlement but did not elaborate during a conference with analysts to discuss the company's first-quarter results.