Federal judge considers tossing charges against former CFO in Broadcom backdating case

Judge could dismiss charges in Broadcom backdating

SANTA ANA, Calif. — A federal judge will consider Tuesday whether allegations of prosecutorial misconduct are serious enough to warrant throwing out a fraud and conspiracy case against Broadcom Corp.’s former chief financial officer.

Former CFO William Ruehle has pleaded not guilty to 14 counts of fraud and conspiracy in the high-profile investigation into stock option backdating at the chipmaker, one of the most successful semiconductor developers in the world.

Backdating involves retroactively setting a stock option’s exercise price to a low point in the stock’s value, boosting profits when the shares are sold. It is legal when properly accounted for, but if not properly disclosed it can allow companies to overstate profits and underpay taxes, while diminishing shareholder value.

Irvine, Calif.-based Broadcom was ultimately forced to write down $2.2 billion in profits after the backdating was uncovered. The company collected nearly $5 billion in revenues last year.

Ruehle’s attorneys allege that lead prosecutor Andrew Stolper leaked information about Broadcom co-founder Henry Samueli’s 2007 grand jury appearance to reporters and contacted the attorneys of two other witnesses to try to influence their testimony.

One of those was former Broadcom general counsel David Dull, who was granted immunity to testify in Ruehle’s case.

In a hearing away from the jury last week, Stolper acknowledged leaking information to the press and called it the “stupidest thing I have done in my career.”

He has declined to comment outside court.

Last week, U.S. District Judge Cormac J. Carney tossed Samueli’s guilty plea and dismissed a charge that he lied to Securities and Exchange Commission investigators, after finding he did not commit the offense.

The 55-year-old billionaire owner of the NHL’s Anaheim Ducks testified for two days for Ruehle’s defense under a grant of immunity.

Samueli’s exoneration was a major blow for the prosecution, which is now struggling to hold together the rest of its case.

A third defendant, Broadcom co-founder Henry T. Nicholas III, is set for trial next year on two separate indictments involving backdating and federal drug charges.

Samueli and Nicholas started Broadcom in 1991 and took it public in 1998. The company grew to 7,000 employees worldwide and is a leading manufacturer for the chips used in everything from cable boxes to cell phones.