The Five Dumbest Things on Wall Street This Week

3. Broadcom's Broad Brush

Broadcom (BRCM) is putting a happy face on its accounting problems.

The Irvine, Calif., communications chipmaker conceded last Friday that it erred in how it booked employee stock options. The company plans a $750 million charge to fix the mistake. Broadcom is still looking into the matter, but plans to restate financials for at least six years.

The issue, Broadcom says, is that stock-option grants "had not been completed as of the original accounting measurement dates." Regulators are investigating option backdating, which can give insiders an advantage by putting their supposedly market-priced options in the money.

Of course, Broadcom is no stranger to perceived pay excess. Co-founders Henry Samueli and Henry T. Nicholas III have been huge sellers of Broadcom stock: Nicholas cashed in $509 million worth in a 15-month period ending in December 2000, and Samueli has sold 900,000 shares this year through a trust. Broadcom also repriced some employee options in 2003. "Together, we all win as Broadcom is able to retain and motivate our most important asset, our employees," the company claimed at the time.

Even so, the restatement news is jarring in light of Broadcom's soft-pedaling statement last month. The company said June 12 that it had decided to check its books "following various reports raising speculation about a few corporate stock-option grants made to Broadcom employees in 2000 and 2002."

Added CEO Scott McGregor, "We want our shareholders and employees to know that we are working proactively and with the highest degree of integrity to put all questions concerning this topic behind us."

So in a month we've gone from "speculation about a few corporate stock-option grants" to a $750 million charge?

It's hard to see how that puts any questions to rest.

Dumb-o-Meter score: 85. "Approximately 95% of the total stock options and restricted stock units ... have gone to employees of the company other than executive officers," the company claims, striking a Robin Hood pose of sorts.