Henry Samueli testifies in CFO's fraud trial

Offering stock options that couldn’t be cashed in for two or three years was key to retaining employees with the Broadcom business in its first years, Broadcom co-founder Henry Samueli testified Tuesday during the fraud trial of the company’s chief financial officer.

“It was a wonderful retention tool,” Samueli, a Newport Beach billionaire, testified on Tuesday during William Ruehle’s trial.

Samueli testified in Ruehle’s defense that he came highly recommended as a potential hire by every Wall Street banker he talked to, and was widely known as a man of unshakable integrity.

Ruehle and Samueli were among company executives charged with federal crimes for allegedly lying to the Securities and Exchange Commission (SEC) about stock options offered to company employees. Broadcom executives allegedly gave employees stock options, but dated them to past dates when the price was lower so when they were cashed in, the employee would get a bigger profit.

Samueli pleaded guilty and is awaiting sentencing for his role in the move. He was granted limited immunity to testify in Ruehle’s trial.

During Tuesday’s testimony, Samueli walked the dozen jurors through the earliest days of Broadcom, which then was a business with a small number of engineers who worked up to 16 hours a day preparing the company for a public offering.

Samueli and co-founder Henry T. Nicholas knew they needed a financial expert, Samueli said, and so, at the suggestion of Morgan Stanley employees, they interviewed Ruehle.

While the company’s stock flourished after its initial public offering, the Internet bubble burst in 2000 and 2001, wiping the value off company stocks, Samueli said. The awards for employees who’d been working up to 80 hours a week were suddenly worthless, he told the jury.