Broadcom to pay $12 million to settle SEC fraud suit

Broadcom Corp. has agreed to pay $12 million to settle a Securities and Exchange Commission lawsuit alleging that the Irvine chip-maker’s top officers falsified reported income by backdating stock options.

“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,” Linda Chatman Thomsen, Director of the SEC’s enforcement division, said in a statement.

As a result of the fraud, Broadcom restated its financial results in January 2007 and reported more than $2 billion in additional compensation expenses, SEC said.

“The scope and magnitude of the fraud warrants the significant penalty imposed on the company,” Thomsen said.

Without referring to them by name, the SEC lawsuit singled out Broadcom co-founders Henry T. Nicholas III and Henry Samueli. The SEC complaint, filed in U.S. District Court, alleges that the company, “acting through its top officers,” misrepresented the dates on which stock options were granted to executives and employees.

Samueli, Broadcom’s chairman and chief technology officer, and Nicholas, then the company’s chief executive, sat on the two-member committee that had the authority to approve options to employees and all but the most senior executives, the SEC said.

Neither could be reached immediately for comment.

Nicholas has checked into the Betty Ford Center for a monthlong alcohol-rehabilitation program, his lawyer, Bill Hake, said last week.

Broadcom, without admitting or denying the SEC allegations, agreed to settle the charges with the $12 million penalty. The company also consented to a permanent injunction against further violations of the antifraud, record-keeping, financial reporting, internal controls and proxy provisions of federal securities laws, the SEC said.

kim.christensen@latimes.com