The former general counsel of Broadcom Corp., David Dull, avoided criminal charges in a stock options backdating case this week following claims of prosecutorial misconduct.
Dull is expected to reach a nonprosecution agreement with the government, according to court documents. He has not been criminally charged in the case, but he is considered to be a co-conspirator in the government's indictment, which leveled securities fraud charges against Henry Nicholas, the former chief executive officer, and William Ruehle, the former chief financial officer, of Broadcom. The U.S. Securities and Exchange Commission also sued Dull in a related civil action in which he has denied any wrongdoing.
Dull was expected to testify Thursday in the government's case against Ruehle, which is in its fifth week of trial.
The prosecutorial misconduct claims arose after U.S. District Court Judge Cormac Carney of the Central District of California in Santa Ana, Calif., made the unusual move of granting immunity to Dull on Monday at the request of Ruehle's lawyers, who wanted him to rebut a key government witness. Carney also granted immunity to Henry Samueli, the co-founder of Broadcom, who is awaiting sentencing after pleading guilty to making a false statement to the SEC.
Both had indicated prior to the immunity order that they would plead the Fifth Amendment if called to testify.
Soon after Carney's order, prosecutorial misconduct claims surfaced. According to press reports, Dull's lawyer, James Asperger, co-chairman of the white-collar group at Los Angeles-based Quinn Emanuel Urquhart Oliver & Hedges, told the judge that Assistant U.S. Attorney Andrew Stolper had called him in an attempt to negotiate his client's upcoming testimony and had warned that Dull should not give the same testimony he had to the SEC.
Such threats were made in order to avoid "adverse consequences," according to proposed jury instructions submitted on Dec. 3 by Ruehle's lawyer, Matthew Umhofer, an associate in the Los Angeles office of New York's Skadden, Arps, Slate, Meagher & Flom.
"Government conduct that interferes with a defense witness's testimony is inappropriate," Umhofer wrote in those instructions. "Mr. Stolper violated his solemn obligation and duty in this case by attempting to influence the content of Mr. Dull's testimony and by making statements that had the effect of suggesting to Mr. Dull's attorneys and Mr. Dull that there would be adverse consequences to Mr. Dull if he testified in a certain manner. This was misconduct, and it was improper."
In support of his argument, Umhofer attached jury instructions from the government's criminal case against W.R. Grace and three of its former executives earlier this year. In that case, which charged the chemical products company and its executives with knowingly distributing asbestos at a former vermiculite mine in Libby, Mont., claims arose in the midst of trial that prosecutors had withheld evidence associated with one of their key witnesses. The judge stopped short of accusing the government of prosecutorial misconduct but told jurors that prosecutors had performed an "inexcusable dereliction of duty" by not sharing the evidence sooner.
Neither Asperger nor Umhofer returned calls seeking comment.
Assistant U.S. Attorney Robb Adkins, chief of the Santa Ana branch of the U.S. Attorney's Office for the Central District of California, and a prosecutor in the Broadcom case, denied that there were threats, according to the government's proposed jury instructions filed on Thursday. "To ensure that Mr. Dull does not feel threatened during his testimony, he has also been given an assurance by the government he will not be prosecuted."
However, he added, "he still would be subject to penalties for perjury or making a false statement."
The nonprosecution agreement "has remedied any prejudice" that became an issue in the government's misconduct actions in the W.R. Grace, he added.
Adkins did not return a call for comment.
On Wednesday, Carney held an evidentiary hearing on the misconduct claims but refused to dismiss the entire case, according to press reports.
The case is the first of three scheduled jury trials involving Broadcom, which restated its earnings by $2.2 billion in 2006 after the backdating came to light. It was the largest restatement on record in the United States. The second trial, against Nicholas, is scheduled for early 2010. A third trial involves narcotics charges against Nicholas.
Dull joined Broadcom as general counsel and vice president of business affairs in March 1998. In 2008, he left the company after the SEC filed charges against him, Ruehle, Samueli and Nicholas.
The prosecutorial misconduct claims in the Broadcom case come the same week as federal prosecutors in San Francisco attempt to revive their stock options backdating case against the former chief executive of Brocade Communications, according to The Recorder, an affiliate publication of The National Law Journal. In that case, the 9th U.S. Circuit Court of Appeals reversed the 2007 conviction of that executive, Gregory Reyes, on prosecutorial misconduct grounds. In particular, the appellate court found that one of the prosecutors had incorrectly claimed in his closing arguments that Brocade's finance department didn't know about backdating.