Tuesday, June 24, 2008

Another Executive Convicted - Of Lying


Henry Samueli, the co-founder of Broadcom has pled guilty to charges in connection with the backdating investigation at Broadcom. What is incredible is that Mr. Samueli did not plead guilty to backdating, or fraud, or any of the underlying crimes, he pled guilty to making a false statement to the SEC staff during the course of their investigation.

Another executive convicted of making false statements, rather than the underlying crime. Has corporate America lost its mind? Do people really think that the SEC staff is too stupid to figure out that you are lying?

And this one is worse. Martha Stewart was convicted of lying during an interview. She was not sworn, it was not a deposition, and was not a formal setting. While I am not condoning her conduct, it is somewhat understandable to succumb to the temptation to lie to save your own neck in an informal interview, sitting across a desk from the SEC attorney. Not the right thing to do, but one can understand the temptation.

According to the WSJ article, Mr. Samueli was testifying at a deposition, under oath, in the middle of a significant and well publicized investigation, and swore that he was not involved in the granting of backdated options for Broadcom's top executives. Well gee, he must have thought that the Staff was too dumb to find the January 2002 email that he sent to a bunch of people in which he said that the company should grant options to executives based on its October 2001 share price. I guess he figured that the four or five or six people that he sent it to would not have copies, and that the email retention policies of Broadcom would not have maintained copies, and that none of the people involved would ever remember the email, or discuss the email with investigators.

And he also must have thought that the SEC would not find the files that he received after that email from the HR department that detailed the backdated option grants.

Now, that doesn't sound like a very strong case for the SEC, and perhaps Mr. Samueli could have prevailed at a trial. I obviously don't know and I am not convinced that the procedure for backdating options was necessarily fraudulent. I also don't know that those two examples of his involvement are enough to get him convicted for lying to the Staff, or perjury, but apparently he and his lawyer thought so.

At the same time, the WSJ is saying that Mr. Samueli will be sentenced to 5 years of probation, no jail time and a 12 million dollar fine. It could very well be that Mr. Samueli decided to take the guarantee of no jail time on a marginal claim rather than risk a trial on the substantive claims, but that is not really my point.

My point is when taking to government investigators, tell the truth, or shut up. Those are your only two choices. Giving prosecutors a slam dunk on a perjury count is not the answer to your dilemma.

Ex-Broadcom Officer Pleads Guilty - WSJ.com
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