Thursday, June 5, 2008

Former CEO and CFO of Broadcom Indicted

A DOJ press release tells that Henry T. Nicholas III, co-founder and former CEO of Broadcom, who also served as co-chair of the board of directors of Broadcom, and William Ruehle, the former CFO were indicted on charges that they allegedly engaged "in a stock-option backdating scheme that forced Broadcom to write-down $2.2 billion in profits." A second indictment against the former CEO related to drug charges including accusing "Nicholas of using ecstasy to spike the drinks of industry executives and employees of Broadcom customers."

It sounds like the evidence to be used against these individuals may have come from a cooperating witness as "the former executive vice president of Human Resources at Broadcom, pleaded guilty to obstruction of justice charges and agreed to cooperate." (see here)

It's a massive 21 count, 65 page indictment that includes a host of criminal charges like "conspiracy, securities fraud, false certification of financial reports, false statements in reports filed with the SEC, lying to accountants, falsification of corporate books and records, and honest services mail and wire fraud." 

The government also has a parallel proceeding in a pending SEC civil action. (see here) (Note that general counsel was listed on SEC matter).

With the former CEO and CFO indicted together, one has to wonder if the government will be seeking to obtain a plea to secure testimony from one of these individuals to be used against the other. Based upon recent cases, it seems we often see the CFO providing the testimony against the CEO. But on the other hand, the government may feel it has sufficient evidence in the documents and the testimony of the human resources VP and maybe they have others who have agreed to cooperate. How these individuals will hold up under cross-examination also remains to be seen. But the real question may be whether DOJ should be spending tax dollars on this type of prosecution.

See also LA Times here, WSJ here.


Addendum -

Nicholas-Ruehle Indictment - Download broadcom_nicholasruehle_indictment.pdf

Nicholas Indictment (Drug Related) -Download broadcom_nicholas_drug_indictment.pdf

(esp) (w/ thanks to Whitney Curtis)

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