Broadcom Corporation, the maker of semiconductors for wired and wireless communications, has agreed to pay $160.5 million to settle a securities fraud lawsuit over backdated stock options although it did not admit any wrongdoing.
The Irvine California-based chipmaker said it has agreed in principle to settle the securities class action litigation pending against the company and certain of its current and former officers and directors. The law suits, which relate to the company's historical stock option accounting practices, were brought on by certain investors who acquired shares of Broadcom's common stock between 21 July 2005 and 13 July 2006.
In the lawsuit, several former and current executives and directors, including William Ruehle, Broadcom's former chief financial officer, and one of a co-founder, Henry Samueli were named as defendants.
The investors had sued the company in 2006 claiming they lost $2.22 billion when Broadcom restated earnings for a four-year period because of backdated stock options, which led to the company share price falling.
Backdating involves setting a stock option price at a date in the past to a low point in the stock's value, rather than the date it is issued and is legal when companies account for the price disparity in their books, but it can allow companies to overstate profits and underpay taxes if it is not properly disclosed.
Broadcom had maintained that the claims raised in the class action litigation were without merit, and has vigorously contested those claims. As part of the settlement, the company and the individual defendants continue to deny any liability or wrongdoing.