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In 2006, people started to notice that something wasn’t right at Broadcom.
Analysts at two separate banks pointed to questionable activity at the California high-tech company and soon after, the SEC also caught on. The government’s investigation into a widespread options backdating scheme led Broadcom to announce a $2.2 billion writedown, the largest accounting restatement in history attributable to backdating. In connection with this restatement, the extraordinarily successful chip-maker admitted that every financial statement it ever issued as a public company was materially false and misleading.
On behalf of the New Mexico State Investment Council, the public pension fund appointed by the Court as lead plaintiff, Labaton Sucharow initiated a class action against Broadcom, certain former officers of Broadcom, and Broadcom’s independent auditor, Ernst & Young LLP, in California federal court. In 2009, the Firm negotiated a $160.5 million settlement with Broadcom and the individual defendants, one of the largest up-front cash settlements ever recovered in such a case at the time of the settlement. In 2012, the Firm negotiated a $13 million settlement with Broadcom’s auditor, Ernst & Young. Many institutions and millions of individual shareholders were represented in the class action and will be favorably impacted by its successful conclusion. Equally important to the financial settlement, the Broadcom case will have a significant deterrent effect. Class action is an important tool in the arsenal of corporate reform. By successfully prosecuting such cases, Labaton Sucharow hopes to bring to closure an era of rampant corporate greed and help to restore public trust in the corporate sphere.