We’re still scratching our heads over this one. Last week, Broadcom announced in an 8K filing that it had settled a stock option backdating derivative suit for $118 million. If approved by Los Angeles federal district court judge Manuel Real, it would be the second-largest backdating settlement for a derivative suit (behind UnitedHealthcare), and one of the biggest derivative settlements ever, according to Kevin LaCroix of The D & O Diary.
Depending on how you look at it, it could appear that all the money will be used to pay lawyers, on the plaintiffs and defense side. You see, Broadcom is liable for a whopping $130 million in attorneys’ fees racked up by the 19 officers and directors caught up in backdating charges, including two who face criminal counts. The $118 million that Broadcom will receive–which is coming from its D&O insurers under a settlement–will be eaten up by the $11.5 million fee for the plaintiffs’ lawyers and this $130 million-plus defense tab. Broadcom is obligated to pay these defense fees under the indemnification agreements it signed with these officers and directors.
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