"This cash recovery is the second largest up-front settlement ever from a company accused of stock options backdating and represents a substantial percentage of damages incurred by the Class," said Gary King, attorney general for the state of New Mexico, in a statement. The New Mexico State Investment Council, represented by King's office, was the lead plaintiff in the lawsuit.
Claims against Broadcom and its officers will be dismissed with prejudice in exchange for the cash settlement, the company said in a statement, though the company and officers named in the suit continued to deny any liability or wrongdoing. The company plans to take a charge in the fourth quarter related to the settlement.
Holders of the company's shares sued in 2007 after a massive $2.2 billion restatement of earnings related to the options backdating practice caused shares to drop. The company's restatement was among the biggest for options backdating, a controversy that caught hundreds of companies up in federal probes and forced many to restate earnings. The big restatement at Broadcom prompted civil and criminal cases against former top officers of the company.
Stock option backdating is illegal unless disclosed because it hides costs. The term refers to the practice of setting dates on employee stock options to times in the past when share prices were down, thereby raising their value, instead of the date issued.
The proposed settlement will have to be finalized and communicated to members of all parties involved in the suit as well as approved by the U.S. District Court for the Central District of California.
