A former executive at chip maker Broadcom Corp. will plead guilty to obstruction of justice and cooperate in a federal probe of company stock option grants, the U.S. attorney's office said Friday.
Former vice president of human resources Nancy Tullos, 56, was charged with instructing a subordinate to delete an e-mail that contained evidence of stock option backdating by Broadcom senior executives and board members.
The plea agreement and details about the charge were filed Friday in U.S. District Court.
Tullos was scheduled for arraignment on Monday, but her sentencing is not expected soon. She could receive a maximum sentence of 10 years in federal prison.
Tullos' attorneys, Ismail Ramsey and Jason de Bretteville, both declined to comment.
In January, Broadcom reduced previous financial results by $2.2 billion.
The Securities and Exchange Commission said it was the largest correction resulting from scores of investigations into how corporations accounted for backdating option grants to make them more valuable.
Documents filed with the SEC in January stated that an internal audit at Broadcom indicated that co-founder and billionaire Henry T. Nicholas III had significant responsibility for improperly backdated stock options.
Nicholas' attorney, John W. Spiegel, said at the time that his client did not knowingly engage in selecting grant dates after the fact and sought advice from appropriate persons regarding the process for option grants.
The audit also found that other executives, including Tullos, had substantial responsibility for the inappropriate grant practices.
Tullos left Broadcom in October 2004, a year after Nicholas departed.
Backdating stock options involves retroactively setting the exercise price to a low point in the stock's value to increase profits for an executive or employee when shares are sold.
If companies backdate options without properly disclosing and accounting for the move, it can cause profits to be overstated and taxes to be underpaid.
Prosecutors allege that Tullos received an e-mail from a subordinate in the summer of 1999 asking if a new engineer's true hire date was May 25, 1999, according to her plea agreement.
The unnamed subordinate wrote that the company's stock price was lower on that date, and the date was used "most likely to lock in a particular price" for the engineer's exercise price, court documents state.
Tullos responded: "pls. delete this message," according to the documents.
Later, the new engineer wrote Tullos and Broadcom's shareholder services department, angry that his hire date was listed as May 28, 1999 — making his stock options $7.37 more expensive per share than the May 25 hire date, the documents state.
"I hope this is just a simple clerical error since that has been a major key deciding factor" in joining Broadcom, the engineer wrote, according to court papers.
The unnamed engineer went on to say that he and a high-level executive, identified only as "Executive A" in court papers, had an agreement that the options would be granted on May 25 with the lower exercise price.
Broadcom's shareholder services department wrote him back, saying they would not change his hire date, but Tullos intervened, asking if the department really wanted to send the e-mail to the engineer, court documents state.
Tullos later learned that Broadcom's option committee granted the engineer 120,000 employee options on the more advantageous date of May 25. The total difference in price for those shares between the two dates was more than $880,000.
More than 100 public companies are under investigation by the SEC and federal prosecutors as a result of stock option backdating.
At least 10 executives have been charged in connection with such schemes. Several companies have paid millions to the SEC to settle civil charges of stock-option backdating.
