On December 15, 2009 -- the anniversary of the adding of the Bill of Rights to our Constitution -- a federal district judge in California provided a dramatic ending to a criminal trial regarding the so-called "stock options backdating scandal." The defendant who was acquitted in that case (due to insufficient evidence and prosecutorial misconduct), William J. Ruehle -- former CFO of Broadcom Corporation -- has just published a book describing the ordeal from his very personal point of view. The book, Mr. Ruehle, You Are A Free Man - A Broadcom Saga is available at Amazon and in eBook format.
In 2006, at age 64, I was contemplating retirement from the company I had helped to grow from a $20 million annual revenue privately-held firm to a $3.6 billion annual revenue public company that was a leader in its industry.
Much to my dismay, instead of a quiet, fade-into-the-sunset retirement, I became a target of federal prosecutors and regulators from the Securities and Exchange Commission (SEC). In a blistering 65-page indictment, I and my former boss, Broadcom co-founder Henry T. Nicholas III, were accused of multiple counts of securities fraud, filing false reports with the SEC, accounting fraud, lying to the company's auditors and, the prosecutors' former favorite (before it was overturned by the Supreme Court), honest services mail and wire fraud. If found guilty on all charges I could have been subjected to up to 380 years in prison!
This all began in 2006 with an academic study purporting to conclude that many companies may have chosen stock option granting dates with hindsight so they could provide favorable incentives to their executives and other employees. If not accounted for properly, this could be a crime. With a media and regulatory agencies whose appetites had been whetted by the Enron and Worldcom scandals of 2002, the phenomenon of "backdating" (a term coined by the media) became the latest corporate scandal.
Never in my wildest imagination did I expect to become a defendant in a criminal case, particularly one that could result in me spending the rest of my life in prison. Nor did I imagine having to face civil charges by the SEC and plaintiffs' attorneys that in a single stroke could wipe out all the financial assets I had worked so hard to build over a 40-year career.
Fighting a criminal indictment has a very low probability of success. In the year of my trial, 2009, white-collar fraud cases were filed against 11,679 defendants in the United States. In that year 88% pleaded guilty, 8% were dismissed prior to trial, leaving only 4% that went to trial. Of those that went to trial 81% resulted in conviction and only 19% in acquittal. Bottom line: once a person has been indicted his/her probability of winning at trial is only 7/10 of one percent.
This story does have a happy ending. The wise and courageous judge in the case, the Honorable Cormac J. Carney, after hearing all the evidence in the case from the prosecution and from the defense, ruled, "To submit this case to the jury would make a mockery of Mr. Ruehle's constitutional right to compulsory process and a fair trial." He then turned to me and said, "Mr. Ruehle, you are a free man."
That ruling came 3 ½ years after the "backdating scandal" first broke. In the interim I was forced to retire ahead of schedule and spend most of my life working with my defense team to shine the bright light of truth on the charges that were being brought against me. It took another 1 ½ years to clear all the civil cases.
The twists and turns of this case are too numerous to describe here. I try to do them justice in my book. In the end, the judge ruled that there had been serious misconduct by the prosecutors, including the intimidating of witnesses, distortion of the truth-finding process, eliciting guilty pleas to non-existent crimes and generally compromising the integrity of the trial. Judge Carney dismissed the case by finding there was prosecutorial misconduct (which could still allow the government to re-try the case) and by finding there was insufficient evidence to send the case to the jury (which has the same force as a jury acquittal, and means I can never be tried again on this matter because of the double jeopardy clause of the Constitution).
At last my wife, Julie, and I and our family and friends could breathe. After the trial we were able to meet with the jurors and even hosted a dinner for them several months later. We learned that they had been attentive listeners and were generally convinced early on that I was not guilty of any crime.
How did we cope with a trauma of this magnitude? Julie and I were able to strike the right balance between taking the case and preparation of our defense very seriously, and still not letting it dominate our lives. We were confident that we had the best possible legal representation in the Skadden, Arps firm with Rich Marmaro as the lead attorney. We relied on the support, and the prayers, of family and friends. We managed to keep our sense of humor. We also had the abiding faith in our justice system and knew I had not committed a crime and we had to have the perseverance and calm-mindedness to relentlessly pursue our quest for acquittal.
I have tried to capture much, much more of the drama and the inner workings of the justice system in my book. I do truly hope you will enjoy it.