Wednesday, December 16, 2009
A U.S. federal judge Tuesday (Dec. 15) dismissed securities fraud charges against Broadcom co-founder Henry Nicholas and a former chief financial officer at the fabless chip vendor, citing prosecutor misconduct.
U.S. District Judge Cormac J. Carney also dismissed a pending civil complaint brought by the U.S. Securities and Exchange Commission (SEC) against Nicholas, Broadcom co-founder Henry Samueli and William Ruehle, the fomer CFO, according to a statement circulated by Broadcom (Irvine, Calif.).
Nicholas and Ruehle were facing conspiracy fraud charges stemming from their role in a stock-options backdating scandal that made Broadcom the target of an SEC investigation beginning in 2006. Like dozens of other companies, Broadcom came under scrutiny for historical stock options backdating in the early part of this decade, Broadcom was eventually forced to take $2.2 billion in charges to quarterly financial reports as a consequence of improperly backdated stock options.
Last week, Judge Carney dismissed a guilty plea entered by Samueli on charges that he lied to investigators in connection with the stock options backdating probe. He ruled that Samueli did not make a material false statement to SEC investigators.
On Tuesday, Carney ruled that a prosecutor in the Broadcom case committed misconduct by improperly attempting to intimidate defendants and witnesses, according to Broadcom's statement and various media reports. According to an Associated Press report, Carney also asked the government to show cause why a separate drug indictment against Nicholas, who stepped down from Broadcom in 2003, should not also be thrown out. The AP report also stated that Carney found that prosecutors tried to prevent three key defense witnesses from testifying, improperly contacted attorneys for defense witnesses and leaked information about grand jury proceedings to the media.
The judge said Nicholas would need the same defense witnesses to try to prove his own innocence, and dismissed the indictment against him because he felt Nicholas could not receive a fair trial, according to the AP report. Prosecutors can appeal the dismissal of the indictment against Nicholas, but Ruehle cannot be tried again because it would be double jeopardy, according to the AP report.
Nicholas was reportedly set to face trial next year on separate indictments for fraud/conspiracy and federal drug charges.
Ruehle, who abruptly stepped down from his post at Broadcom in September 2006 due to stock-options backdating investigations, had pleaded not guilty to 14 counts of fraud, conspiracy, falsifying Broadcom's books and lying to securities regulators.
In the Broadcom statement, President and CEO Scott McGregor said Tuesday's events were important for Broadcom because "they remove an issue that, for some observers, may have partially obscured Broadcom's tremendous business successes." McGregor said the people of Broadcom long ago put behind them the events that led to the cases against Nicholas, Samueli and Ruehle.
It's not clear whether Henry Samueli will resume a more hands-on role at the company now that the civil charges have been lifted. Samueli was widely credited with setting the company's technical direction, but stepped down from his roles as an officer and a member of Broadcom's board after charges were raised against him.
"It's premature to talk about [a new role for Samueli] but this certainly removes any clouds over him," said Broadcom chief executive Scott McGregor in a press Q&A session following a meeting with Wall Street analysts. "This just happened a few hours ago," he added.
By: DocMemory
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