$118 million doesn’t begin to cover Broadcom scheme costs — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
  • LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

$118 million doesn’t begin to cover Broadcom scheme costs

Get PDF file

by on
in Human Resources

If you’ve ever been involved in litigation, you know that lawsuits can be complicated and costly affairs. Your case undoubtedly pales in comparison to one about to be resolved in the U.S. District Court for the Central District of California.

About the best that can be said for the case, involving an alleged stock-options backdating scheme at semiconductor maker Broadcom Corp., is that the lawyers will be well paid.

Plaintiffs and defendants in the case recently asked a federal judge to approve a partial settlement deal. It would be one of the largest ever in a shareholders’ derivative lawsuit.

Backdating schemes typically involve allegations that corporate officers used accounting tricks to manipulate the prices of stocks or derivatives. Broadcom shareholders sued the company on such allegations.

Under the terms of the settlement, the semiconductor maker would collect $118 million from 11 firms that had underwritten directors’ and officers’ liability insurance for the company. It was essentially insurance to protect the company from its own bad acts.

Broadcom also agreed to pay $11.5 million in attorneys’ fees to the plaintiffs’ attorneys.

The real kicker:
Broadcom had to pay more than $130 million out of its own coffers to pay the attorneys hired to defend the Broadcom executives that Broadcom itself was suing.

The settlement agreement also calls for stays in federal actions regarding Broadcom’s backdating issues, repricing of certain stock options and terms that will provide benefits for the company beyond $118 million.

The settlement only covers Broadcom as a corporate entity. Company co-founders Henry Samuels and Henry T. Nichols III could still be held liable for their parts in the alleged scheme.

Leave a Comment

Previous post:

Next post: