Backdating cases dismissed against Broadcom execs

LOS ANGELES Tue Dec 15, 2009 2:53pm EST

Former chief executive and company co-founder Henry Nicholas III leaves the Ronald Reagan Federal Building and United States Courthouse in Santa Ana, California June 5, 2008. REUTERS/Danny Moloshok

Former chief executive and company co-founder Henry Nicholas III leaves the Ronald Reagan Federal Building and United States Courthouse in Santa Ana, California June 5, 2008.

Credit: Reuters/Danny Moloshok

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LOS ANGELES (Reuters) - A federal judge in California on Tuesday dismissed stock options backdating-related charges against Broadcom Corp co-founder Henry Nicholas and former Chief Financial Officer William Ruehle, citing allegations of misconduct by prosecutors.

U.S. District Judge Cormac Carney also ordered prosecutors to explain at a February 2 hearing why they should be allowed to proceed with a separate drug possession trial against Nicholas, set for 2010.

Carney ruled that Ruehle, 67, could not defend himself because prosecutors had "intimidated" witnesses.

The ruling came as the case against Ruehle, which began in October, was headed to a Santa Ana jury. Nicholas was set to go on trial next year on drugs and backdating-related charges. Both men faced hundreds of years in prison.

Ruehle's attorney, Richard Marmaro, of Skadden, Arps, Slate, Meagher & Flom, said his client "never should have been charged."

Nicholas' attorney could not immediately be reached for comment.

U.S. Attorney's Office spokesman Thom Mrozek said the government would review the ruling and consider its options.

Broadcom President and CEO Scott McGregor said the company had put the events that led to the cases behind it and was focusing on business.

"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," McGregor said in a statement.

Marmaro had argued that the indictment should be dismissed because of numerous instances of prosecutor misconduct amounting to bullying and threatening witnesses, and due to the government's inability to show that Ruehle committed a crime.

The government acknowledged that Assistant U.S. Attorney Andrew Stolper had acted inappropriately by leaking information about the Broadcom investigation to the media and in talks with a witness's lawyer, but argued that dismissing the case was not warranted in light of actions the judge took during the trial to protect Ruehle's rights.

The case is the second stock options backdating trial to be tainted by allegations of government abuses.

A federal appeals court in August ordered a new trial for former Brocade Communications Corp CEO Gregory Reyes over prosecutors' false statements to a jury and their failure to hand over evidence to Reyes' attorneys.

Reyes was the only other CEO to face criminal charges in the government's long-running stock options backdating investigation, which resulted in probes of options granting practices at about 170 companies.

Carney last week set aside a guilty plea and dismissed a charge against one of the Broadcom case's main witnesses -- Broadcom co-founder Henry Samueli. The judge said Samueli had not intentionally lied to the U.S. Securities and Exchange Commission during the backdating probe, despite his guilty plea to the charge in 2008.

(Reporting by Gina Keating; Editing by Richard Chang)

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