Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, March 5, 2008

SEC Settles Charges Against Former Broadcom VP

The SEC filed a settled enforcement action against Nancy M. Tullos, the former vice president of human resources at Broadcom Corporation, for her participation in a five-year scheme to backdate stock options granted to Broadcom employees and officers.  As a result of this scheme, Broadcom restated its financial results in January 2007 and reported an additional $2.22 billion in compensation expenses — the largest restatement to date arising from stock option backdating.

The SEC charged Tullos with participating in a scheme at Broadcom from 1998 to 2003 to backdate stock option grants.  The SEC's complaint alleges that Tullos communicated false grant dates within the company and provided spreadsheets of stock option allocations for the backdated grants to Broadcom's finance and shareholder services departments, knowing that they would use such information to prepare Broadcom's books and records and periodic filings with the SEC. As a result, the complaint alleges that Tullos contributed to Broadcom's misrepresentations in these filings that no compensation expense was required for the stock option grants. Tullos personally benefited from the backdating scheme because she received and exercised backdated stock options that were in-the-money by more than $1.2 million.

Under the settlement, Tullos agreed to pay more than $1.3 million in disgorgement and prejudgment interest, which will be offset by the value of her exercisable stock options that Broadcom cancelled. She agreed to pay a civil penalty of $100,000. Tullos also will be permanently enjoined from federal securities violations.  Tullos agreed to the settlement without admitting or denying the allegations in the complaint.

Tullos' settlement is subject to approval by the court.

http://lawprofessors.typepad.com/securities/2008/03/sec-settles-cha.html

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