Broadcom ex-exec to plead guilty
A former Broadcom Corp. executive has agreed to plead guilty to instructing a subordinate to delete a damaging e-mail, court documents disclosed Friday. Federal prosecutors had alleged that the note had provided evidence of stock manipulation by senior executives, including Broadcom founders Henry Samueli and Henry T. Nicholas III.
Prosecutors filed an obstruction-of-justice charge against Nancy Tullos, a former human relations vice president at the Irvine chip maker. They also filed her plea agreement, requiring Tullos to cooperate with their investigation of allegations that Broadcom executives backdated stock options to secretly benefit employees.
Tullos’ attorneys declined to comment. An attorney for Samueli, a billionaire philanthropist, couldn’t be reached.
John Spiegel, an attorney for Nicholas, noted that Broadcom’s audit committee had found Nicholas and Samueli did not benefit personally from any alleged backdating. He noted that the case against Tullos “did not charge that the stock option grant in question was itself illegal.”
Broadcom said in January that option grants between June 1998 and May 2003 had been improperly dated. It took a charge of $2.26 billion to account for resulting unrecorded expenses.
The documents center on the 1999 hiring of an engineer who was enticed to join Broadcom with an offer of 120,000 stock options from a pool set up to benefit employees.
Nicholas and Samueli aren’t identified by name; the court filing refers to an Executive A and an Executive B. The filing says these were senior executives who were also on the board of directors and members of the company’s two-man option-granting committee. At the time, Samueli and Nicholas were the only members of Broadcom’s five-person board who were also executives -- and the only two people on the options committee.
The filing describes Samueli and Tullos working to set up a pre-hiring discussion between the engineer and Nicholas on May 26. The filing also said Tullos was told in an e-mail that a “senior finance executive” identified as Executive C said the earliest option grant date should have been March 28. That was a Friday -- the only day of the week on which new employees could get options.
The engineer received stock options with a grant date of March 25, according to the federal complaint. During that three-day period, Broadcom’s stock rose by $7.38 a share, making the stock options worth $885,000 more if dated on March 25 than on March 28.
Several weeks later, Tullos received an e-mail from a subordinate asking if the engineer’s true hiring date was March 25, saying the date was used “most likely to lock in a particular price” for the stock.
Tullos replied in one line: “pls. delete this message.” Her plea agreement says she “knew that the electronic mail . . . might damage Broadcom if the United States Justice Department or other federal agencies were to obtain it for use in an official proceeding.”
The e-mail “was evidence of option backdating by Broadcom senior executives and board members,” the U.S. attorney’s office said in a press release. Officials said the reference was to Executive A and Executive B.
White-collar defense attorney Jan Handzlik, a former federal prosecutor, said the case as disclosed appeared weak, showing mainly that Broadcom was doing whatever it could to reward hires and employees with stock options.
“Where is the criminal intent here?” Handzlik said.
Tullos, 56, of Malibu, is to be arraigned Monday in U.S. District Court in Santa Ana. Her plea agreement said she also had reached an agreement to settle civil charges with the Securities and Exchange Commission and repay “the total excess value of any backdated options she received.”
