Broadcom leader said to resist probe
Henry Samueli, the billionaire chairman of Broadcom Corp., has refused an informal request to be interviewed by federal criminal investigators looking into the manipulation of stock-option grants at the Irvine technology company, people with knowledge of the probe said.
The sticking point has been the government’s refusal to assure Samueli that he is only a witness and not a subject of the investigation, these people said. The government won’t make this promise, they said, because it is still scrutinizing Samueli’s role.
Federal authorities have suggested to Broadcom’s attorneys that the company should encourage Samueli to cooperate, asking the lawyers, “What, if anything, are you going to do about this?” one person said.
The company has attempted to stay out of the fray, this person said, saying it hoped the government and Samueli could work something out.
The people who spoke about the case did so on condition of anonymity, saying the probe by the FBI and the U.S. attorney’s office was still in its early stages. The company also has disclosed that the Securities and Exchange Commission is conducting a formal review.
In an e-mail message, Samueli’s attorney, Gordon A. Greenberg, called the statements about his client “highly inappropriate and misleading.” He did not elaborate.
David Siegel, an outside attorney for Broadcom, said the company had no comment “except to reiterate that it is cooperating with the government authorities.”
“We can also add that Dr. Samueli did cooperate fully and voluntarily with the company’s internal investigation,” he said.
Broadcom’s explosive growth in the 1990s made Samueli, 52, an iconic figure in the Southern California technology industry. He and his wife, Susan, have become pillars of the Orange County community, donating millions of dollars to universities and charities, buying the Anaheim Ducks hockey team and funding a new venue at the Orange County Performing Arts Center.
His refusal to be interviewed stands in contrast to the actions of Apple Inc. Chairman Steve Jobs, whom federal authorities have interviewed in a similar probe related to stock options.
But securities law expert John C. Coffee said Samueli’s attorneys probably advised him to avoid an unconditional interview, citing the experience of lifestyle entrepreneur Martha Stewart.
When Stewart talked to prosecutors, “She thought she was offering information that would show how she wasn’t involved” in insider trading, said Coffee, a professor at Columbia University’s law school.
“And she wound up being prosecuted,” Coffee said. “I think a cautious criminal defense counsel would say, ‘I don’t want you putting yourself in those shoes.’ Martha Stewart didn’t go to jail for insider trading, she went to jail for making false statements to the U.S. attorney.”
Because of a recent court ruling, prosecutors are limited in how hard they can push companies to hand over confidential material and implicate employees, Coffee noted.
But prosecutors still have the right to expect a company to cooperate with an investigation and could pressure Broadcom to ask Samueli -- who also is the company’s chief technology officer -- to cooperate or step aside while the investigation progresses.
“They could reasonably say, ‘You can’t keep someone on the board and in high office that refuses to talk to us, that is stonewalling us,’ ” Coffee said.
“Martha Stewart took a leave of absence from her company’s board,” he said. “I think Broadcom’s outside directors might be forced to do the same thing -- to ask Samueli to take a leave.”
Robert Friese, a San Francisco defense attorney who specializes in government investigations, said it once would have been unusual for a company chairman to refuse to speak with investigators and stay on at the firm. But because federal sentencing guidelines have made the penalties for business fraud so severe, often 10 to 25 years in prison, he said, there is less stigma attached to refusing to speak to prosecutors.
“It would depend to some extent on how valuable the individual is to the company, and how the company views his culpability or lack of it,” Friese said. “If they think he’s an out-and-out crook they certainly wouldn’t keep him on.”
Stock options are rights to buy shares at a set price during a specified period. That price is normally the market value of the stock on the date the option is granted.
Broadcom is among nearly 200 companies that are the subject of internal or federal investigations into whether executives backdated options by choosing grant dates when the stock price was low, thus making the options more valuable, without disclosing it to shareholders.
Samueli and former Chief Executive Henry T. Nicholas III, along with their trusts and families, control the majority of the company’s voting stock. The pair were the sole members of the option committee that made what Broadcom has said were at least 18 improperly dated grants.
Last month, Broadcom said its internal investigation determined that Nicholas bore “significant responsibility” for improperly backdated options that forced the company to slice $2.2 billion off its past financial statements to reflect unreported expenses, the largest charge taken to date by any of the companies under scrutiny.
Nicholas’ attorney, John Spiegel, has said his client did not knowingly engage in improper backdating.
The internal probe excused Samueli, saying he “relied on management and other professionals” in signing off on option grant dates. The inquiry also found that the backdating benefited other Broadcom employees, but not Nicholas and Samueli personally.
Unlike Samueli, Nicholas refused to be interviewed for the company’s internal investigation into the backdated options, Broadcom has said.
The company also has identified two departed executives it said were actively involved in manipulating options: Nancy Tullos, former head of human relations, and William Ruehle, former chief financial officer.
Tullos’ attorney, Ismael “Izzy” Ramsey, declined to comment.
Ruehle’s attorney, Richard Marmaro, said, “If he’s indicted we’ll go to trial.”
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