Broadcom to Pay Big Price for Options Backdating

Companies that once lured talented new hires with generous stock options -- the value of which they manipulated -- continue to get their comeuppance. The SEC is seeking big penalties against companies these days for backdating stock option grants to dates when the stock price was lower, thus increasing their value.

Irvine, Calif.-based Broadcom Corp., a maker of semiconductors that was long on revenue potential but wanted to preserve cash, paid modest salaries for talented new employees but offered generous options grants for executives and employees. The company was accused by the SEC of cooking the grant dates of such options over a five-year period, which led to a restatement of financial results last year that reported more than $2 billion in additional compensation expenses.

The case is one of the largest since backdating hit the SEC's radar. And regulators sought a penalty worthy of the magnitude of the crime.

Broadcom agreed to pay $12 million to settle the charges without admitting or denying allegations. But the trouble isn't necessarily over for company officials, who could face criminal charges in a federal court, as have officials of other high-profile backdaters.

Mercury Interactive Corp. (now owned by Hewlett Packard Co.) still holds the record for the largest backdating penalty. Without admitting or denying the charges, Mercury agreed to pay $28 million for failing to record hundreds of millions of dollars in compensation expenses. That company's former CFO, Sharlene P. Abrams, was indicted in federal court this week for the scheme, The Wall Street Journal reported. Broadcom executives may be next.