Project 3 - Project 3: Financial Ethics Paper BCOR 2200...

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Project 3: Financial Ethics Paper BCOR 2200 Introductory Finance, Spring 2008 Note: for TA Use Item Pts Sco re Comment Q1 0 Q2 10 Q3 10 Q4 10 Q5 10 Q6 10 Q7 10 8 Citation s 20 9 Appearance 10 10 Clarity 10 Total Score 10 0 1) Cite the Wall Street Journal article by title, date, and author (if available). “Broadcom, SEC Settle Backdating Case” 2) Give a brief overview of the article and the ethical issue. Identify the person or company involved. Broadcom Corporation, a very large communications company, recently agreed to pay $12 million to settle charges regarding backdating stock options. Backdating is the process of granting an employee stock option at a date that is previous than the date the option is actually granted. The Security and Exchange Commission conducted an investigation relating to a $2 billion dollar addition to Broadcom’s financial reports for 2007, which is one of the largest restatements in history. As many as 88 cases of backdating occurred within Broadcom to their executives and employees, according to the charges filed by the SEC in their civil lawsuit against Broadcom. Nancy Tullos, a former Broadcom HR executive recently plead guilty to obstructing justice, paying a $1.4 million fine, although she never admitted guilt to any backdating issues. When a company backdates options, it ends up distorting their financial statements which can be misleading to investors and to the market in general. According to Elizabeth Olson at
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Portfolio.com, “The options were also a means of avoiding reporting compensation expenses, leading to overstating company income by as much as 422 percent. Losses were also
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This note was uploaded on 03/01/2009 for the course BCOR 2500 taught by Professor Adams during the Fall '08 term at Colorado.

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Project 3 - Project 3: Financial Ethics Paper BCOR 2200...

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