Broadcom Gets Option Scrutiny

Broadcom's (BRCM) stock-option grants are getting attention from shareholders and federal regulators.

The Irvine, Calif., communications chipmaker said Monday the Securities and Exchange Commission is probing the company's option-grant practices. Broadcom also says a shareholder lawsuit filed May 26 in the Central District Court of California charges the company with misconduct related to executive stock-option grants.

The company says the lawsuit has no merit, and that it will defend itself vigorously.

Broadcom is among the latest companies to receive federal scrutiny under the widening stock-option "backdating" scandal. Dozens of companies are suspected of timing executives' option grants to coincide with the stock's lowest price. The suspicious practice enhances the value of the stock options held by fat cats as the price increases.

"In light of the questions raised and the high level of attention being given to option-granting practices among technology companies and more broadly, 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," CEO Scott McGregor said in a press release Monday.

The SEC probe covers the entire stock-option history of the company since it went public in 1998.

Stock options have been particularly lucrative for Broadcom executives. Founders former CEO Henry Nicholas and chairman Henry Samueli each hold over $1 billion in Broadcom stock, and both men have been active sellers. Last month alone, Samueli sold $17 million worth of Broadcom shares.

Broadcom was up 42 cents to $29.75 in late-morning trading Monday.

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