Broadcom co-founder scheduled as defense witness in former exec’s stock options fraud trial

Broadcom co-founder to testify in fraud trial

SANTA ANA, Calif. — Broadcom Corp.’s co-founder is scheduled to testify Tuesday in the fraud trial of the company’s chief financial officer.

Henry Samueli won immunity from a federal judge last week and was ordered to testify. He’s expected to be a defense witness for CFO William Ruehle, who is accused of backdating stock options.

Backdating occurs when a company retroactively sets the options’ exercise price to a low point in the stock’s value to increase the recipient’s profits when the shares are sold. If the practice isn’t properly disclosed, it can cause profits to be overstated and taxes to be underpaid.

Broadcom hasn’t admitted any wrongdoing, but the computer chip maker reduced previous financial results by $2.2 billion in 2007 and agreed to pay $12 million to settle a civil complaint over the issue.

Samueli pleaded guilty last year to lying to Securities and Exchange Commission during its investigation. In exchange, Samueli was to serve five years of probation and pay $12 million to the federal government.

But U.S. District Judge Cormac J. Carney rejected the plea deal as too lenient and said he didn’t want the public to think the billionaire owner of the NHL’s Anaheim Ducks could buy justice. Samueli appealed the rejection and lost.

Carney is expected to resentence Samueli after Ruehle’s trial.

Samueli’s legal team, however, has asked a judge to dismiss the charge due to prosecutor misconduct, including allegations that Assistant U.S. Attorney Andrew Stolper leaked grand jury information to the media and contacted the attorney of another defense witness about his upcoming testimony.

Stolper has declined to comment on the allegations.