Broadcom options probe intensifies

Times Staff Writers

A federal grand jury has subpoenaed documents related to improper backdating of Broadcom Corp. stock options, and prosecutors have begun interviewing current and former Broadcom employees in the case, the Irvine-based computer chip company said Tuesday.

The disclosures, in a quarterly filing with the Securities and Exchange Commission, suggest the criminal probe has intensified.

Broadcom previously had disclosed a formal investigation by the SEC, which could impose civil penalties on the company and its executives. It also had said it was informally contacted by the U.S. attorney’s office for the Central District of California in August and had voluntarily given documents and data to prosecutors.

The latest filing says the company also has provided documents in response to grand jury subpoenas.


The filing didn’t identify which employees had been questioned by prosecutors. Broadcom in January identified three people it said had been involved in backdating options: its billionaire co-founder and former chief executive, Henry T. Nicholas III; former Chief Financial Officer William J. Ruehle; and Nancy M. Tullos, the company’s ex-head of human resources.

People with knowledge of the investigation said in February that Broadcom’s chairman and co-founder, Henry Samueli, had refused to be interviewed because the government wouldn’t assure him he was only a witness and not a subject of the criminal investigation.

Attorneys for Nicholas, Samueli, Ruehle and Tullos couldn’t be reached for comment Tuesday.

Stock options, the rights to buy shares at a set price in the future, are designed to reward employees if the stock price rises above its level on the day of the grant.


More than 220 public companies have disclosed investigations into the manipulation of options to make them more valuable, usually by secretly backdating them to a date when the stock price was lower. In January, Broadcom added $2.2 billion in expenses to its past financial statements to reflect previously undisclosed option expenses -- by far the largest such restatement by any of the companies entangled in the scandal.

A spokesman for the U.S. attorney’s office declined to comment on the grand jury’s proceedings.

The company said the grand jury’s requests for information weren’t surprising.

“Grand jury subpoenas are an integral and expected part of any U.S. attorney’s office investigation, and we do not consider them to have any independent significance,” Broadcom spokesman William Blanning said.