[JURIST] A federal grand jury has indicted two former executives of Silicon Valley technology firm Broadcom [corporate website] in connection with a scheme to backdate company stock options. According to the indictment [PDF text] unsealed in federal court Thursday, firm co-founder Henry T. Nicholas III and former CEO William J. Ruehle engaged in a "conspiracy to disguise, conceal, understate, and mischaracterize compensation expenses Broadcom was required to recognize in connection with its stock options." Nicholas was also indicted separately on drug charges [indictment, PDF]. In May, the US Securities and Exchange Commission (SEC) filed a civil complaint [JURIST report] against Broadcom for stock option back-dating. AP has more. The Los Angeles Times has local coverage.

The practice of backdating involves setting an option-holder's stock price at a day when stock prices were low instead of the price on the day the option was granted. Although the practice itself is not illegal, it usually involves a violation of SEC and other federal reporting requirements [SOX guide]. Broadcom is the latest technology-related firm to come under SEC scrutiny for stock option backdating. In January, the former CEO of Brocade Communication Systems was sentenced [JURIST report] to 21 months in prison and fined $15 million for the improper backdating of stock options. In October 2007, Mercury Interactive settled [JURIST report] a similar case for a record $117.5 million. In February 2007, the US Department of Justice indicted [JURIST report] the former general counsel of McAfee systems for stock option backdating. In January 2007, the US Attorney's office in San Francisco, CA opened a criminal probe [JURIST report] into backdating at computer maker Apple Inc.