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The former chief financial officer of Broadcom Corp. has urged the 9th U.S. Circuit Court of Appeals to sustain a lower court that blasted Los Angeles-based Irell & Manella for “ethical misconduct” in a criminal backdating case. Lawyers for William Ruehle, the former executive, said in a brief filed with the 9th Circuit on July 16 that their client believed that conversations he had with Irell & Manella attorneys were protected by the attorney-client privilege. Ruehle and Henry Nicholas, co-founder and former chief executive of Broadcom, were indicted last year on charges including conspiracy and securities fraud related to stock options backdating. The company was forced in 2007 to restate earnings by more than $2.2 billion. Both have pleaded not guilty. In April, U.S. District Judge Cormac J. Carney of the Central District of California issued a written order finding that Irell & Manella, which had represented Ruehle in related civil actions involving stock options backdating, failed to warn him of a potential conflict inherent in representing both him and Broadcom at the same time. In 2006, two Irell & Manella attorneys interviewed Ruehle while the firm was representing Broadcom in its internal investigation of stock options backdating. In his order, Carney referred Irell & Manella to the State Bar of California for “ethical misconduct.” “Irell’s ethical breaches of duty of loyalty are very troubling,” the judge wrote. “It must be disconcerting to Mr. Ruehle to know that his own lawyers at Irell disclosed his confidential and privileged information to the Government, lawyers whom Mr. Ruehle trusted and believed would never do anything to hurt him.” On appeal before the 9th Circuit, federal prosecutors argued that Ruehle was aware that information from the 2006 conversation with Irell & Manella would be turned over to Ernst & Young, Broadcom’s outside auditor, as part of the internal investigation. Furthermore, Irell’s lawyers had given Ruehle an “Upjohn warning” informing him that the conversation was privileged as to Broadcom and the audit committee, but not to him personally. As a result, Ruehle could not have “reasonably believed” that Irell & Manella was representing him individually, according to their brief. “The issue is not to whom defendant believed the information he provided would be conveyed, but rather that defendant understood that the information about options practices was not intended to remain in confidence solely between him and the Irell lawyers,” wrote Assistant U.S. Attorney Daniel B. Levin in the brief. Prosecutors also argued that Carney used the wrong standard in concluding that Ruehle could assert attorney-client privilege in the case. Levin did not return a call for comment. In his brief, Ruehle argued that Irell’s lawyers could not come up with a written record reflecting the Upjohn warning and did not obtain Ruehle’s permission to turn over his communications to the government. “The government attempts to confuse the matter by twisting Mr. Ruehle’s general statement that the Irell attorneys were directed to give ‘factual information’ to Ernst & Young,” wrote Ruehle’s attorney, Richard Marmaro, head of the West Coast securities enforcement and white collar defense practice of New York-based Skadden, Arps, Slate, Meagher & Flom. “The attempt fails because Mr. Ruehle testified quite clearly that he anticipated Irell would provide only ‘certain factual’ information to Ernst & Young, and only ‘factual information that they determined was appropriate and was not otherwise privileged information.’ “ Ruehle “reasonably understood” that certain of his statements would remain confidential and he relied on his lawyers to determine which statements were protected under attorney-client privilege, the brief said. Marmaro did not return a call for comment, nor did David Siegel, a partner at Irell & Manella. Last month, Carney ordered an evidentiary hearing into whether an attorney-client relationship also existed between Irell & Manella and Nicholas, who is seeking to exclude certain evidence under claims that are similar to Ruehle’s. That hearing is scheduled for this week.

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