SEC abandons beleaguered backdating case against Broadcom former executives

The U.S. Securities and Exchange Commission has voluntarily dropped its civil case against four former executives of Broadcom Corp., including the former general counsel. The move came one week after a federal judge said there were “serious problems” with the charges.

It was the latest setback in the U.S. government’s pursuit of securities fraud tied to stock options backdating at Broadcom. On Dec. 15, U.S. District Judge Cormac Carney dismissed criminal charges against Broadcom co-founder Henry Nicholas and William Ruehle, the former chief financial officer, based in large part on prosecutorial misconduct. The judge also dismissed the SEC’s related complaint but gave the commission the option to amend the charges.

In a notice of intent not to proceed filed on Thursday, Molly White, an attorney in the SEC’s Los Angeles office, cited Carney’s decision to dismiss the case, as well as statements he made during a subsequent hearing on Jan. 28.

“After careful consideration of the Court’s sua sponte dismissal of the Commission’s Complaint on December 15, 2009, and the Court’s comments during the January 28, 2010, hearing, the Commission does not intend to proceed further in this action,” the court document says.

The SEC’s suit, filed last year, had named as defendants Nicholas, Ruehle, Broadcom co-founder Henry Samueli and David Dull, Broadcom’s former general counsel.

“It was a wise decision to follow the judge’s ruling and dismiss all charges,” said Ruehle’s lawyer, Richard Marmaro, a partner in the Los Angeles office of New York’s Skadden, Arps, Slate, Meagher & Flom. “We never thought there was any securities fraud at Broadcom, and the conclusion of this case confirms that.”

“We are pleased that after very careful review the SEC decided to end its case against Dr. Samueli,” said Samueli’s lawyer, Gordon Greenberg, a partner in the Los Angeles office of McDermott, Will & Emery. “We believe that allowing Dr. Samueli to focus his energy on cutting edge technology is in the best interests of Broadcom and its shareholders.”

“We are pleased that the SEC has dropped its lawsuit and gratified that it reached the right decision,” said Dull’s lawyer, Seth Aronson, a partner in the Los Angeles office of O’Melveny & Myers.