Judge Throws Out Charges Against Broadcom Founder Nicholas

Broadcom Indictment

A federal judge, citing prosecutorial misconduct,threw out fraud charges Tuesday against Broadcom's former chief financial officer
and co-founder Henry T. Nicholas III in an employee stock-options backdating case.
U.S. District Judge Cormac Carney's ruling, accompanied by a scathing indictment of the prosecution's actions, came nearly a week after he threw out Broadcom co-founder Henry Samueli's guilty plea in the same case.
Carney's ruling nearly wiped the slate clean of Broadcom executives caught up in the government's case, essentially leaving only Nicholas open to unrelated drug charges. And the judge scheduled a Feb. 2 hearing to consider whether the drug indictment should also be tossed.
Carney accused prosecutors of ``intimidating'' three key witnesses that ex-CFO William Ruehle and Nicholas needed to help them defend themselves against charges they concealed the backdating stock options to fatten the Irvine-based company's bottom line.
Backdating stock options is not illegal, but it must be reported to shareholders. Broadcom used the stock options to lure the best talent to the telecommunications giant when competition for engineers was fierce during the Internet boom.
``It's going to take some time to absorb this,'' a stunned Ruehle said after leaving the courtroom. ``(Carney's) a courageous judge.''
Jurors had been scheduled to begin deliberating this week. The panel had been on the case since Oct. 23.
``Based on the complete record before me, I found the government intimidated and improperly influenced witnesses,'' Carney said. ``To submit this case to a jury would make a mockery of a fair trial.''
Before Samueli testified, Carney granted limited immunity to former general counsel David Dull, characterized by prosecutors as an unindicted co-conspirator, and full immunity to Samueli so they could testify on Ruehle's behalf.
Carney ruled that Assistant U.S. Attorney Andrew Stolper engaged in prosecutorial misconduct when he told Dull's attorneys that he faced perjury charges if his testimony was consistent with what he told the U.S. Securities and Exchange Commission in a deposition.
``The government believed Mr. Dull was a co-conspirator, yet did not seek charges against him and left him hanging in the wind for almost two years,'' Carney said, adding that prosecutors also ``promised a soft cross (examination) if he (Dull) disparaged Mr. Ruehle'' on the stand.
``They forgot the truth is never negotiable,'' the judge said.
Carney called Samueli a ``brilliant engineer and a man of incredible integrity,'' and said there was ``no evidence presented at trial that he did anything wrong.''
Prosecutors ``embarrassed him'' and wore him down with 30 interrogations and then ``leaked to the media'' that Samueli was not cooperating because he invoked his Fifth Amendment rights -- something Stolper acknowledged on the stand last week as the ``stupidest'' thing he's done in his career.
Prosecutors drafted ``an unconscionable plea agreement to plead guilty to something (Samueli) did not do,'' and asked him to pay a ``ridiculous'' $12 million fine, Carney said.
``Needless to say, the government's treatment of Mr. Samueli was shameful and contrary to American values of decency and justice,'' the judge said.
Ruehle's indictment was dismissed with prejudice, meaning the government cannot pursue similar charges against him. The dismissal was based on prosecutorial misconduct and a failure to produce enough evidence.
Former Broadcom Human Resources Director Nancy Tullos' testimony for the government was ``tainted'' because she was bullied into a guilty plea upon losing the job she held after Broadcom when prosecutors subpoenaed her employee records, the judge said.
It's unclear what federal prosecutors have left to pursue. Carney also dismissed the SEC case against Dull and discouraged the regulators from re-filing it.
``Obviously we have heard your decision, but we respectfully disagree with you,'' U.S. Attorney George Cardona told Carney. ``I don't believe there's any reason to say anything further ... But I hope you understand we disagree.''
Thom Mrozek, a spokesman for the U.S. Attorney's Office, said it was ``carefully reviewing the judge's ruling to determine what options we may have.''
Samueli called Carney's ruling vindication for Broadcom, adding that he got tears in his eyes as the judge announced his decision.
``To see Broadcom smeared like that was so painful to me,'' Samueli said outside the courtroom. ``What (the prosecutors) did was shameful and Judge Carney set the record straight.
``I have one dream -- that Judge Carney will some day be (appointed) to the U.S. Supreme Court,'' Samueli added. ``He's not afraid to make a bold decision, and that's something this country needs.''
Samueli said one of the more painful aspects of the investigation was that he could not talk to his one-time UCLA student Nicholas or Ruehle, the man hired after the company went public and made Samueli a millionaire many times over.
``I've not talked to him (Nicholas) for so long, literally years,'' because they were prevented from doing so during the investigation, Samueli said. ``It's painful to me because we were so close for so many years. It felt good to give (Nicholas and Ruehle) a hug and a kiss.''
Samueli, who owns the Anaheim Ducks hockey team, said he was going to attend an NHL Board of Governors meeting today and laughed when asked why the NHL cleared him to resume his ownership duties before Carney threw out his guilty plea.
``I don't know what they knew, but they knew me,'' he said, chuckling.
Broadcom President and Chief Executive Officer Scott McGregor issued a prepared statement, saying the company's staff ``long ago put behind us the events -- some as old as 10 years -- that led to these cases.''
``We have remained squarely focused on creating the best technology and the greatest growth for our company,'' he said. ``Still, today's events are important for Broadcom because they remove an issue that, for some observers, may have partially obscured Broadcom's tremendous business successes.''
To his critics, Carney said, ``I have a solemn responsibility to hold the government to the Constitution ... I ask my critics to put yourselves in my shoes ... (The defense) has only three witnesses to prove innocence and the government has intimidated all three of them. Is that fair? Is that justice. I say absolutely not.''

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