On behalf of the New Mexico State Investment Council (New Mexico), Labaton Sucharow served as lead counsel in In re Broadcom Corp. Class Action Litigation, a case stemming from Broadcom Corp.'s (Broadcom) $2.2 billion restatement of its historic financial statements for 1998 through 2005—the largest restatement in history due to options backdating.
New Mexico alleges that, from Broadcom's inception as a public company in 1998 through the end of the class period in July 2006, certain of Broadcom's senior officers and directors participated in a fraudulent scheme to inflate Broadcom's stock price by intentionally backdating most of Broadcom's stock option grants between April 1998 and May 2003. In connection with the Restatement, Broadcom admitted that every financial statement it ever issued as a public company was materially false and misleading, and acknowledged that there is "substantial evidence" demonstrating that certain of its former officers engaged in backdating.
The Court Sustains the Majority of New Mexico's Allegations
In November 2008, Defendants moved to dismiss the Amended Complaint, challenging, inter alia, the sufficiency of New Mexico's loss causation allegations and scienter allegations. On February 2, 2009, the Honorable Manuel L. Real heard oral argument regarding Defendants' motions. Ruling from the bench, the Court rejected the majority of Defendants' motions to dismiss, finding that the Amended Complaint properly stated claims under Section 10(b) and Rule 10b-5 against defendants Broadcom, Henry Samueli (former Chairman and Chief Technical Officer), William Ruehle (former Chief Financial Officer), David Dull (former General Counsel), Werner Wolfen (former director who served simultaneously on the Compensation and Audit Committees) and Alan Ross (former Chief Executive Officer and director who served simultaneously on the Compensation and Audit Committees).
New Mexico Obtains $160.5 Million Settlement
In December 2009, New Mexico reached an agreement-in-principle with Broadcom and the individual defendants to resolve this matter for $160.5 million. At the time of the settlement, this represented the second largest up-front cash settlement ever recovered from a company accused of options backdating. On June 1, 2010, the Honorable Manuel L. Real of the United States District Court for the Central District of California granted preliminary approval of the settlement. On August 2, 2010, the court granted final approval of the settlement.
The deadline for filing a proof of claim form was August 13, 2010.