: Probes of Backdating Move to Faster Track; Stock-Option Emails
At Broadcom Are Focus; Monster Worldwide Plea
James Bandler and Charles Forelle
Wall Street Journal
. (Eastern edition). New York, N.Y.:
Feb 16, 2007
On Jan. 4, 2002, the chief financial officer of Broadcom Corp. tapped out an email about stock options to his
chief executive and others.
"I VERY strongly recommend that these options be priced as of December 24," he wrote.
They were, and that was fortunate for recipients. Broadcom's share price rose 23% between the two dates. The
pretense that the options had been granted on the earlier date made them extra valuable.
It also violated the rationale of stock options. They give recipients a right to buy stock in the future at the price
when the options are granted, so that recipients can profit only if the price of their company's stock goes up.
Setting a lower "exercise price" for the options gives recipients a head start on profiting.
The Broadcom correspondence, found in an internal investigation at the maker of communication chips, is just
one of a number internal documents that have drawn the attention of federal prosecutors and Federal Bureau
of Investigation agents in Orange County, Calif. Prosecutors are strongly considering filing criminal charges
against the former Broadcom chief financial officer who wrote the email, William J. Ruehle, and at least one
other former executive, according to people familiar with the situation.
Mr. Ruehle's lawyer said his client didn't break the law.
The Broadcom probe is a sign of how long-running investigations of stock-options backdating are heating up.
Yesterday, a former general counsel of Monster Worldwide Inc. pleaded guilty to securities fraud in federal
court in Manhattan. The day before, the founder of Take-Two Interactive Software Inc. pleaded guilty to a New
York State charge in a backdating scheme.
Prosecutors in a half-dozen jurisdictions are zeroing in on other cases. The filing of criminal charges in some of
these in coming months would mark a watershed in the scandal, as prosecutors and regulators winnow the
roster of some 140 companies with options problems to a tighter list of promising cases.
The government is nearing charges against a former official of computer-security company McAfee Inc., say
people familiar with the situation, and is strongly considering bringing cases against ex- executives of Apple
Inc. and semiconductor-equipment maker KLA-Tencor Corp. In St. Louis, at least one former executive of
Engineered Support Systems Inc., a defense contractor now owned by DRS Technologies Inc. of Parsippany,
N.J., has been told of a likely charge, says a person close to the matter.
The former Monster Worldwide general counsel who pleaded guilty yesterday is Myron Olesnyckyj, 45. He