The pay was tiny, but a generous option grant offered the promise of great wealth if the company succeeded.
The burgeoning company was hiring most of its employees on the same terms: few dollars but lots of options. “Two individuals could start a week apart and each have their options priced at their respective start dates.
Federal prosecutors charged that he had in fact been involved in the process.
Three days later, on June 23, Samueli, a billionaire philanthropist and owner of the Anaheim Ducks National Hockey League franchise, pled guilty as part of a plea agreement that called for five years probation and a fine of 0,000 (the legal maximum) and a million penalty.
There has been widespread news coverage of the dramatic December 15, 2009 decision of Central District of California Judge Cormac Carney to throw out the options backdating related criminal charges against Broadcom co-founder Henry T.
Nicholas III and CFO William Ruehle, based on prosecutorial misconduct.
In November, 2007, following a lengthy grand jury investigation of Broadcom, Corp., a multi-billion dollar semiconductor company in Orange County, California, Nancy Tullos, former Broadcom human resources director, was charged and pled guilty to participating in an alleged stock options back-dating scheme and agreed to testify for federal prosecutors.
Samueli was accused of testifying falsely under oath before the SEC when he said he was not involved in the actual granting of stock options. As a result, journalism today is populated by innumerable muckrakers, and the Justice Department by hundreds of “dockside bullies.”Bill Ruehle’s bad luck was to discover this first-hand. Ruehle was the chief financial officer (CFO) of Broadcom Communications, an Internet company founded in 1991 by “a quiet electronics engineering professor from UCLA (Henry Samueli) and his not-so-quiet student (Henry Nicholas).” Broadcom first turned a profit in 1994: revenues were .6 million. Ruehle, You Are a Free Man —A Broadcom Saga: My Fight for Justice. Likewise, cynical government prosecutors have many incentives to pursue media-defamed businessmen, also regardless of guilt: convictions bring prosecutors journalistic adulation, departmental promotions, lavish private-firm job offers, and even political power.Ruehle’s constitutional right to compulsory process and a fair trial." In addition to the sheer potency of Judge Carney’s rhetoric, there are several other interesting aspects to Judge Carney’s rulings, some of which have not been fully noted in press reports.The first is that Judge Carney’s decision to dismiss the case against Nicholas came during Ruehle’s trial. There was not even a motion on behalf of Nicholas pending.Judge Carney’s decision is a case-hardened, bunker-buster, heat -seeking bomb — that hit the bulls-eye. Attorney Andrew Stolper, the lead prosecutor in the case, received particularly sharp criticism.Among other things, he cites the prosecutors for "intimidating and improperly influencing" witnesses, which "compromised the truth process and compromised the integrity of the trial"; for making improper leaks to the media; for improperly pressuring Broadcom to terminate Samueli; for obtaining an "inflammatory indictment" of Samueli; and crafting "an unconscionable plea agreement" with Samueli. Among other things, Judge Carney said that "the lead prosecutor somehow forget that truth is never negotiable." Of the case against Ruehle, Judge Carney said that to submit it to the jury "would make a mockery of Mr. .99 Sir Thomas More: You threaten like a dockside bully. Sir Thomas: Like a minister of state, with justice. Left-wing journalists today have many incentives to launch rich-hunts against nationally prominent businessmen, regardless of guilt: such frenzies bring journalists raises, praises, prizes, and book contracts. What the media says about this fellow’s behavior seems extremely reprehensible, and he surely would not have been indicted unless there was very good evidence for the illegality of those actions.”Unfortunately, as I have learned during the past seven years, such a view is completely false when it comes to the prosecution of corporate executives.Instead he let his guilty plea stand, meaning that he could have been sent to prison for years. During his testimony, Samueli said that he had pled guilty to making a false statement to the SEC.In the fall of 2009, Ruehle went on trial before Carney in U. Ruehle’s attorney asked, “Do you recall whether that statement involved whether or not you were involved in granting options to officers of the company, which was the job of the compensation committee, and that you indicated that you were not so involved?This is a way of repricing options to make them valuable or more valuable when the option "strike price" (the fixed price at which the owner of the option can purchase stock) is fixed to the stock price at the date the option was granted.Cases of backdating employee stock options have drawn public and media attention.However, the sentencing was postponed and on September 8, 2008, Judge Carney rejected the terms of the plea agreement.