Prosecutors halt case against Broadcom co-founders

The decision closes the Justice Department's two-year legal battle against Henry Samueli and Henry T. Nicholas III.

May 29, 2010|By Stuart Pfeifer, Los Angeles Times

Federal prosecutors decided Friday not to appeal a judge's recent dismissals of criminal stock options backdating charges against Broadcom Corp. co-founders Henry Samueli and Henry T. Nicholas III.

The decision brought to a close a two-year legal battle between the billionaire executives and the Justice Department.

Late Friday, Nicholas released a statement that said, "The decision by the Department of Justice reconfirms my faith in our criminal justice system."

In December, U.S. District Judge Cormac J. Carney dismissed the charges against Samueli and Nicholas, accusing prosecutors of a "shameful" campaign to intimidate witnesses and obtain unjustified convictions.

Prosecutors filed a notice of intent to appeal the dismissals to the 9th U.S. Circuit Court of Appeals, but on Friday they informed the court they would not file any appeals.

Thom Mrozek, a spokesman for the U.S. attorney's office in Los Angeles, said prosecutors chose not to follow through with the appeal "after a thorough evaluation of the issues." He declined to elaborate.

The decision comes two years after prosecutors filed the sensational case, accusing Samueli, Nicholas and two other company executives of an elaborate scheme to secretly increase the value of employee stock options and failing to disclose the expense in regulatory filings. Nicholas was also charged with distributing narcotics to friends and business associates.

The charges were a devastating blow to Samueli and Nicholas, who founded the company in a Redondo Beach garage and turned it into one of the nation's most prominent chip designers. Its chips are used in products such as Apple iPhones, cable television boxes and laptop computers.

Samueli, who owns the Anaheim Ducks hockey team, pleaded guilty in 2008 to a charge of lying to investigators about how the company handled the stock options. In December, Carney reversed the guilty plea and threw out the case.

The judge subsequently dismissed all charges against Nicholas and options-related charges against William J. Ruehle, the company's former chief financial officer, and Nancy Tullos, its former human resources director. Prosecutors also dropped plans Friday to appeal the judge's ruling on Tullos.

Samueli and Tullos could not be reached for comment.

The prosecutions began to unravel in December during Ruehle's trial. Carney said prosecutors acted improperly when they contacted the lawyer for a witness in the case and said he could face perjury charges if he testified in court as he had to regulators.

Samueli, who had not yet been sentenced, testified as a defense witness for Ruehle. He said that he thought the company had handled its employee stock options properly and that neither he nor anyone at the company had intended to deceive shareholders.

Samueli said he pleaded guilty to a charge of lying to regulators about the options practices to avoid a sensational trial and the possibility of a lengthy prison term.

Carney said he didn't believe Samueli knowingly had committed any crimes and reversed Samueli's guilty plea. He threw out the case against Ruehle before a jury was to begin deliberations and dismissed Nicholas' case before the trial was scheduled to begin.