Federal prosecutors won’t appeal dismissal of criminal charges against Broadcom co-founders

Feds drops appeals in Broadcom backdating case

SANTA ANA, Calif. — Federal prosecutors said Friday they won’t appeal the dismissal of criminal charges against the founders of high-tech chipmaker Broadcom, ending an embarrassing chapter for the government during which a judge blasted prosecutors for “shameful” misconduct and a lack of evidence.

The government decided not to appeal the cases against Henry T. Nicholas III and Henry Samueli, U.S. attorney’s spokesman Thom Mrozek said.

Prosecutors also withdrew their appeal of U.S. District Judge Cormac Carney’s dismissal of former Broadcom human resources director Nancy Tullos’ guilty plea to obstruction of justice.

The announcement wipes away the last vestiges of a massive and high-profile criminal and civil prosecution of Broadcom’s top leadership on allegations of stock option backdating that fell apart under judicial scrutiny.

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.

The Irvine, Calif.-based chipmaker was ultimately forced to write down $2.2 billion in profits after its actions were uncovered. Hundreds of other companies have been forced to make similar adjustments or pay fines to the SEC since authorities began investigating the practice in 2006.

Carney in December also threw out the stock option backdating case against ex-CFO William Ruehle.

“After a thorough evaluation of the issues associated with the cases, the government decided to not pursue the appeals,” said Mrozek. He declined further comment.

Nicholas released a statement through a spokesman after the announcement.

“The decision by the Department of Justice reconfirms my faith in our criminal justice system,” Nicholas said.

Samueli’s attorney, Gordon Greenberg told the Orange County Register that he was “simply delighted that the Department of Justice has done the right thing.”

Local prosecutors filed an intent to appeal Jan. 7, but needed approval from Justice Department officials in Washington. Earlier this month, local prosecutors asked for another month to make their decision and were facing a June 10 deadline.

Nicholas also faced narcotics charges that were dismissed.